What will happen to your home and car if you file bankruptcy? The answer depends on your circumstances and what type of bankruptcy you file.
Bankruptcy laws allow the financially bankrupt to protect what they own and to help debtors alleviate a bad financial situation. Allowing debtors to keep a portion of their assets allows the debtor to either pay a portion or all of their debts. In some cases, they will have the opportunity to completely start over. In either case, it would be hard for a debtor to start over or pay a portion of their debts if they were not allowed to keep their home (or a percentage of equity in their home) or a vehicle to get them to work.
Exemption laws were created to allow debtors to keep certain assets and to make the assets exempt from liquidation. Most state and federal exemptions will allow a debtor to keep so much equity in their homes and at least one vehicle. Some states, like Texas, will allow you to keep one-hundred percent of your home if it has been homesteaded and you have kept up with the payments.
Whether or not you can keep your home and car can depend on what type of bankruptcy you file. There are basically two types of bankruptcies most individuals can file: Chapter 7 or Chapter 13 Bankruptcy.
Chapter 7 Bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships.
Chapter 13 Bankruptcy is the second bankruptcy available to individuals and is called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts within a three or a five year time frame.
In Chapter 7 Bankruptcy, the trustee will take your non-exempt assets, liquidate them, and use the proceeds to pay your debts. Your home and car are protected (only up to the amount of federal or state exemption that is allowed for the equity). If you own your home and car out right, you might not be able to keep them if the state or federal exemption is less than the equity in the asset.
In Chapter 13 Bankruptcy, you can keep all your assets, including your vehicles and home, as long as you are current on your payments on the secured loans. When you fall behind on your payments, the lender can either repossess or foreclose on the assets. If you own those assets out right, you can keep them as long as you complete the repayment plan and close the bankruptcy.
You cannot always qualify for Chapter 7 or Chapter 13 Bankruptcy. To qualify for Chapter 7 Bankruptcy, you must either be below the state’s median income in which you live or pass a Means Test devised by the 2005 bankruptcy changes. If you qualify under either standard, you can still choose to file Chapter 13, Bankruptcy, providing you qualify.
There are other complex laws that might prevent you from filing either Chapter 7 or Chapter 13 bankruptcy and can determine whether you can keep your home and/or your car. Obviously, bankruptcy laws can be complicated and if you are considering bankruptcy, contact a bankruptcy lawyer.
If you need relief from the stress of debt and you live in or around the metropolitan area of El Paso, Texas, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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