File Bankruptcy - your questions answered right here...
More About File Bankruptcy...
You're deep in debt. You've investigated bankruptcy alternatives, but they are not going to work for you. You are hesitant to file bankruptcy because you're afraid you won't be left with anything but the clothes you stand in. Don't worry too much. You probably will lose less than you imagine.
If you file chapter 13 bankruptcy, you will most likely keep all of your assets. That is why many people prefer to use chapter 13 if they have a steady source of income. If you use chapter 7, often called liquidation bankruptcy, you may still be able to keep your house, car, and other property.
In chapter 7 bankruptcy, as in other chapters, some property is considered exempt. Exempt property is what you own that the Bankruptcy Code or state law permits you to keep from unsecured creditors. Several states have a homestead exemption that exempts all or part of the equity in a primary residence from bankruptcy. Some states also allow exemption for part or all 'tools of trade' used to make a living (dental tools for a dentist, shoeing equipment for a farrier, etc.). There may be exemptions allowed for furniture and clothing also.
What bankruptcy exemptions are available and the amount allowed varies from state to state. Some states allow you to chose between state and federal exemptions. The exemptions can change, so you need to find out the current exemptions available to you where you live.
In most cases, if the equity in your house is fully exempt and you are still making regular payments, you can keep it. For example, you own a
$100,000 house and you still owe $60,000; all or part the $40,000 which is your equity may be exempt depending on current exemptions available in your state. Keep in mind that when you determine whether or not something is exempt, the value used is not the amount you paid for it, but what it is currently worth. This is especially true for furniture and cars.
Under chapter 7, even though exemptions allow you to keep property, it does not change the right of mortgage companies or car loan companies to take the property back if you are behind in your payments. Under chapter 13, you keep your property if your repayment plan meets the requirements of bankruptcy law. Most times you will still have to pay the mortgage or any lien just as if you hadn't filed bankruptcy. If you don't make payments on the debt, the creditor may be able to take your house or other property during of after your bankruptcy.
If you want to keep something you put up as collateral or keep a mortgaged property, there are ways to do it after you file bankruptcy. You can make an agreement to keep making payments until the debt is paid. You can pay the creditor the amount the property you want to keep is worth (think car). If you think the creditor has cheated you or done something wrong, you may be able to challenge the debt. If you used household goods as collateral for anything other than to purchase the good, you usually get to keep the property.
If you have to bite the bullet and use bankruptcy to salvage your finances, don't delay because you think you will lose your property. Chances are you will be able to keep your house and car. A consultation with a
bankruptcy lawyer or a financial advisor will set your mind at ease about your particular situation.
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