Everyone should be afraid of the thought of bankruptcy. This is a legal order that permits the court to seize property if the debtor or organization cannot pay. People considering bankruptcy often ask the following question: “Can I file for bankruptcy and keep my house and car?” 

Answers to this question depend on which chapter is in bankruptcy and what state regulations are used. In some cases, however, you may be able to save your home and car.

Secured Debts vs. Unsecured Debts

Recall that bankruptcy will not eliminate your obligation to pay secured debts. By allowing unsecured debt to be forgiven, bankruptcy can offer financial freedom. Secured debt, on the other hand, is a previous obligation that you must pay regardless of your financial situation.

  • Unsecured Debt: These are loans (i.e., credit cards) that the lender does not have recourse to for your assets like a car or house.
  • Secured Debt: Different types of loans (car loans and home loans) where you agree to pay the loan amount, but also that the lender can seize your assets if you don’t make payment.

In the event of default, a secured lender can take your property and make it available for a loan. If you do not agree to give up the collateral, bankruptcy will not release you from secured debts.

Therefore, bankruptcy victims can only keep their homes and car if it is possible to afford the monthly loan payments.

Chapter 7 vs. Chapter 13 Bankruptcy

Individuals can choose between Chapter 7 bankruptcy or Chapter 13 bankruptcy.

  • Chapter 7 Bankruptcy – This is a liquidation bankruptcy that eliminates as much unsecured debt as possible, without having to repay it through a repayment plan.
  • Chapter 13 Bankruptcy – Also called a wage earners plan. This allows a person with a regular income to devise a plan to repay all or part of their debts. Chapter 13 bankruptcy is a plan of repayment that lasts for three to five years.

Chapter 7 bankruptcy permits you to keep your home provided that you are current on your mortgage payments at the time you file for bankruptcy, and your state laws allow you to use the bankruptcy exemption. If you fall behind on your mortgage payments, there is a high chance that you will lose your home.

Chapter 13 bankruptcy can provide a grace period for you to catch up on your mortgage payments if they are late. You may be able to save your home if you and the court can agree on a repayment plan.

Chapter 7 cases usually allow you to keep your car if you have current payments. While Chapter 13 cases allow you to keep your vehicle even if payments are late. In both cases, you can expect a tighter loan sanction from the lender, and the possibility of having to “reaffirm” the debt through a new agreement.

Can I File for Bankruptcy While Keeping My Car and House?

It all depends on your financial situation, the bankruptcy, and the status of your house and car loans. It is easier to keep your car than your house in bankruptcy. You’ll be able to save on your home if your mortgage payments are on time.

You will need to show your commitment to auto and home lenders by agreeing to their terms. Chapter 13 bankruptcy requires approval from the court for your repayment plan. Chapter 7 depends on your past history with the mortgage lender.

Under the right circumstances, it is possible to keep your house and car while also filing for bankruptcy. It all depends on your filing, as well as your state’s bankruptcy laws regarding property exemptions and what other debts you have in your state, like property taxes and student loans.

Still have questions?

Consider a Consultation with a Bankruptcy Lawyer Today

Bankruptcy is a powerful tool that can help to alleviate the crushing burden of debt, restore a tarnished credit rating, and provide a fresh start for those who qualify. However, with so many myths attached to bankruptcy these days, an accurate assessment of your financial status isn’t always easy to make. 

Thus, it is often wise to consult with a qualified Tallahassee bankruptcy lawyer in order to learn more about whether or not bankruptcy is the right option for you.

Should you find yourself in a situation where this is your only option, our attorneys are ready to help. Bruner Wright P.A. is committed to the law and will fight for you to get the fresh start you need. Our Jacksonville and Tallahassee bankruptcy attorneys are always ready to give you the advice you need! To arrange a free initial consultation, please contact our bankruptcy attorneys today!