Your House and Your Car in Chapter 7
The Truth from a Hawaii Bankruptcy Attorney
If you are considering filing a Chapter 7 bankruptcy, you may be wondering what will happen to your car, home and other valuable property. The good news is that there are protections built into the law that help a person retain their home and vehicle in the midst of bankruptcy. First and foremost, filing a Honolulu bankruptcy would immediately stop foreclosure and stop repossession of a vehicle. This will offer you necessary “breathing room,” so you have time to consider your options with an experience lawyer.
Your Home in Chapter 7
You may be able to keep your home during a Chapter 7 plan if you are able to exempt the equity you have and if you can continue to pay the mortgage after bankruptcy. An exemption effectively means your equity is protected from being sold by the bankruptcy trustee to pay your creditors.
The bankruptcy code allows for debtors to utilize bankruptcy exemptions to the fullest extent. The federal bankruptcy rules allow for a home equity exemption of $21,625, which is double for married couples filing jointly. If these amounts are equal to or greater than the amount of equity you have in your home, then the trustee will not be able to sell your home.
However, if your mortgage exceeds the full value of your home and you have no equity, Chapter 7 can still be very beneficial. Without filing for bankruptcy, the lender would be able to foreclose on the home, and then sue you personally for the remainder of the debt. However, if you cannot afford to keep your home, you can surrender the property and the remaining amount owed will be completely wiped out in Chapter 7.
Your Car in Chapter 7
If you own your car when you file Chapter 7 bankruptcy, it will be protected from being sold if its value is less than or equal to the allowed exempt amount. Similar to a home, you can use the exemptions to maximize the property you can keep.
If you are being threatened with repossession of your vehicle, a Chapter 7 bankruptcy will stop repossession attempts immediately. If your car was recently repossessed, you may even be able to get it back if you act at once. Contact our Hawaii bankruptcy attorney immediately for more information if your car was repossessed.
There are several options available to help you keep your vehicle if you can afford it. Some lenders will allow you to keep your car and will release you from the loan in exchange for purchasing the car at its current value (called a redemption). Others will let you sign a new contract (called a reaffirmation) which may let you keep making the same payments you had before filing bankruptcy. These options have important consequences, so it is best that you first consult with a qualified bankruptcy attorney before entering into a redemption or reaffirmation agreement with a lender.
Help is Available
If you are considering Chapter 7 bankruptcy and are concerned about your house or car, give our office a call. We have helped individuals just like you get their lives back on track with the help of our experienced Hawaii lawyer.