Keeping Your Home and Car During Bankruptcy

Filing for bankruptcy is often seen as a last resort for individuals facing overwhelming debt. While the bankruptcy process allows you to eliminate or repay a portion of your debts, it’s natural to worry about losing your most cherished assets, such as your car or home.

Fortunately, there are legal protections in place that may allow you to keep these valuable items while navigating bankruptcy.

Understanding the bankruptcy code is key. Bankruptcy in the United States is typically divided into two main types for individuals: Chapter 7, known as ‘liquidation bankruptcy’, and Chapter 13, often referred to as ‘wage earner’s bankruptcy’.

In Chapter 7 bankruptcy, some of your assets may be sold or ‘liquidated’ to repay creditors. Chapter 13, on the other hand, allows you to keep your assets while restructuring your debts into a manageable repayment plan.

The type of bankruptcy you file can significantly impact whether you can keep your home or car.

Keeping your home in bankrutcy


Exemptions in Bankruptcy

An important aspect of bankruptcy law is the concept of exemptions. These are laws that allow you to protect certain property from being seized in bankruptcy. The specific exemptions available depend on federal and state laws.

Federal exemptions: The federal bankruptcy code provides a list of exemptions, including a homestead exemption to protect some of the equity in your home, and an exemption for a vehicle up to a certain value.

State exemptions: Each state has its own set of bankruptcy exemptions. Some states allow you to choose between state and federal exemptions, while others require you to use the state exemptions. These can be more generous than federal exemptions in some cases.

In both cases, if your equity in the home or car is less than the exemption amount, you will typically be able to keep these assets in a Chapter 7 bankruptcy.

If you are behind on your mortgage or car loan and want to keep these assets, Chapter 13 bankruptcy may be a better choice.

Chapter 13 allows you to repay your arrears over time while maintaining your regular monthly payments. As long as you adhere to the terms of your repayment plan, you can avoid foreclosure or repossession.


Bankruptcy and Secured Debts

A crucial point to understand is that bankruptcy typically doesn’t eliminate secured debts, such as a mortgage or car loan.

While bankruptcy can wipe out your personal obligation to pay the debt, the lender still has the right to take the property if you default on your loan.

Therefore, if you want to keep these assets, it’s essential to stay current on your payments.

In some cases, you may consider signing a reaffirmation agreement during a Chapter 7 bankruptcy.

This is a legal document that states you wish to keep an asset, like a car, and are willing to continue paying the debt despite the bankruptcy filing. However, this decision should be made cautiously as it removes that debt from bankruptcy protection.


Consult a Bankruptcy Attorney

Bankruptcy is a complex legal process, and the details matter enormously. While this article provides a general overview, your specific circumstances can greatly influence the outcome.

Therefore, it’s always advisable to consult with a bankruptcy attorney before deciding to file.

Remember, while bankruptcy can provide a fresh start, it also carries significant consequences. It’s essential to thoroughly understand the process, your rights, and the potential outcomes before making a decision.

In summary, while filing for bankruptcy does put your assets at risk, there are legal mechanisms, such as exemptions and Chapter 13 repayment plans, that can help you keep your home and car.

Understanding these options and seeking professional advice is the key to navigating the bankruptcy process effectively and coming out the other side in the best position possible.


Learn More

At Blue Bee Bankruptcy, our lawyers are highly experienced in bankruptcy options. More importantly, we understand that each case we receive is unique and each client has different needs and goals. We will discuss these signs with you and decide the best route to take.

We strive to help our clients rebuild their lives and take steps toward a better financial future through filing. 


Best Bankruptcy Attorneys in Salt Lake City


If you’re dealing with the potential of bankruptcy, give us a call. Our team will work to help you by reviewing all of the options our firm has available. We will ensure you’ll get the best possible outcome for your situation.

Get in touch today so we can start working on either halting bankruptcies or preventing them from taking place altogether!

Contact Us Today For Help! You can schedule your free consultation online or call us at (801) 285-0980.


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