Conditions That Allow You To Keep Car And House In Chapter 7 Bankruptcy
One of the risks you face when filing for Chapter 7 bankruptcy is being forced to turn over assets that you have, and this can even include a house and car. While this occurs in some situations, it does not always happen. There are many situations in which people are able to keep both their home and car when filing for Chapter 7, and here are the conditions that will affect your ability to keep your house and car.
The amount of equity you have in these assets
One of the things your lawyer will examine when you are discussing your house and car is the amount of equity you currently have in these assets. Every state allows a certain amount of exemptions for equity to anyone that files for bankruptcy. As long as you do not have a lot of equity in either of these assets, you might be able to keep them simply because of the state exemptions that protect you. When you meet with a lawyer, bring a document that shows the value of your house and car as well as the amount of money you owe on each. Just by looking at these figures, your lawyer will likely be able to tell you if you meet this condition.
The current status of your loan accounts
The second condition that you must meet involves the current status of your loan. To keep either a car or a house, you cannot be past due on the payments. In other words, your accounts must have a status of "current." In many situations, people will continue paying their mortgages and car payments, even if they cannot afford to pay their other bills. If you had followed this and stayed current on these debts, you will have a much better chance of being able to keep them.
The willingness of your lenders to agree to reaffirmation of debt
The other condition will involve your lenders. When you decide to file for Chapter 7 and keep a valuable asset like a car or house, you must get it approved through your lender. This process is called reaffirming a debt, and it will not be approved until your lender agrees to it. Lenders typically are agreeable to reaffirmations of debt when borrowers are not behind on their payments.
If you can meet these conditions, you will likely be able to keep your house and your car, even if you file for Chapter 7. To learn more about these conditions, talk to a local bankruptcy law firm.