What Can Happen to Your House and Car in a Bankruptcy?
COLUMBUS, OH, December 15, 2022 /24-7PressRelease/ — Bankruptcy can be a good option for those who are struggling financially and in need of debt relief. What happens to your house and car in bankruptcy will depend on your particular circumstances and whether you choose to file for Chapter 7 or Chapter 13 bankruptcy.
Bankruptcy attorney Courtney Cousino explains, “Bankruptcy laws are complicated, and choosing the right path depends on an individual’s unique circumstances. An experienced bankruptcy attorney can help determine which path is best for you.”
How Will Filing Bankruptcy Affect Your Car?
Your car’s value and the amount of equity you have in it will impact which type of bankruptcy you decide to proceed under. Equity is the value of an asset minus what is owed on it. If your auto loan is current or paid off, you will be able to keep your car in a Chapter 7 bankruptcy to the extent that exemption laws allow it. The federal exemption is currently $4,450 and each state has their own exemption amounts.
If the vehicle’s equity is within the exemption limit, you will be able to keep the vehicle as long as you remain current with the loan payments. If the amount of equity you have in the vehicle is more than the exemption limit, your vehicle can be liquidated in a Chapter 7 bankruptcy, and the amount over the exemption will be used to repay creditors. If your loan payments are not current, the lender can repossess the car. A bankruptcy filing can protect you from any balance owed on the loan after the vehicle is repossessed and sold.
You might be able to keep the car if you bring the loan payments current or sign a “reaffirmation” agreement. In a Chapter 13 bankruptcy, your debt is consolidated into a repayment plan. If your loan payments are overdue, the repayment plan will include catch-up payments, allowing you to keep your vehicle and repay the loan during a three to five year plan.
How Will Filing Bankruptcy Affect Your House?
Both Chapter 7 and Chapter 13 bankruptcy can allow you to keep your home, depending on whether your mortgage payments are current. If you’re not behind on your mortgage payments when you file for Chapter 7 bankruptcy and your state’s exemption laws protect the equity in your home, you will be able to keep your home.
Many times, because unsecured debts are eliminated in a Chapter 7, a debtor’s finances will be freed up, making it easier to stay current on mortgage payments. If, however, you have already defaulted on your mortgage when you file for Chapter 7 bankruptcy, the lender can foreclose on your property. You would need to make arrangements with the lender to cure the default immediately.
When you are behind on your mortgage payments and want to keep your home, a Chapter 13 bankruptcy might be the best option because it will allow you time to catch up. The court will approve a repayment plan that requires you to pay past-due mortgage payments over three to five years while continuing to make current mortgage payments. Your lender cannot foreclose as long as you stay current on your payments.
About Fesenmyer Cousino Weinzimmer
Fesenmyer Cousino Weinzimmer focuses on debt-relief law practice, including bankruptcy, debt settlement negotiations with creditors, and foreclosure defense for mortgage holders. The firm has offices in Columbus, Dayton and Cincinnati, and its seasoned attorneys are dedicated to helping their clients get a fresh start.
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