What Will Happen To My Home And Car If I File Bankruptcy?

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. However, some of your creditors may have a “security interest” in your home, automobile, or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you do not make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put your household goods up as collateral for a loan (other than a loan to purchase the goods) you can usually keep your property without making any more payments on that debt. The answer depends on the type of bankruptcy you are filing and the status of any indebtedness on the property in question. Again, if you have any questions, contact a local bankruptcy attorney.

What Property Is Exempt in Chapter 7?

In a Chapter 7 bankruptcy, you can keep all property which is exempt under bankruptcy law from the claims of creditors. In determining which property is exempt, you can use either state law or federal law. In many cases the federal exemptions are more generous. They include:

$16,500 in equity in your home
$2,575 in equity in your car
$425 per item in any household goods up to a total of $8,625
$1,625 in job-related tools, books, etc.
$850 in any property, plus part of the unused exemption in your home, up to $8,075
Your right to receive social security, unemployment, VA benefits, welfare, and pensions, regardless of the amount
The exemption amounts above are doubled when a married couple files together.

For more information on whether you should elect to use federal or state bankruptcy exemptions, contact a local bankruptcy attorney in your jurisdiction.

Can I Own Anything After Bankruptcy?

Yes. You can keep all exempt property. You can almost always keep anything obtained after the bankruptcy is filed, too. The main exception is that if you receive an inheritance, property settlement, or life insurance payment within 180 days after filing for bankruptcy, that money or property might have to be turned over to your creditors, unless it qualifies for an exemption.

Will Bankruptcy Affect My Credit?

Yes, but probably not as much as you might expect. If you are already so far behind on your bills that you are contemplating bankruptcy, then your credit is probably pretty bad, and may actually improve by filing for bankruptcy. Of course, a bankruptcy can usually be shown on your credit record for ten years, while bad debts can usually be shown only for seven. However, since bankruptcy wipes out your old debts, you are likely to be in a better position to pay new bills and may actually have better credit immediately after the bankruptcy than immediately before the bankruptcy.

Will Bankruptcy Affect My Security Clearance?

If you have a security clearance or may want to get one in the future, you should know that it can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors. Again, speak with your local attorney for more information.

I am Getting Divorced. What Should I Do About My Bankruptcy?

If the debts are in both names, you should probably file a joint petition for bankruptcy. That way both of you can get a discharge for the price of one. If the debts are in your name only, you should consider filing for bankruptcy after the divorce becomes final. If you have to pay any spousal or child support, that can be used as a factor in determining your ability to pay.


Brian D. Zinn is a contract attorney who services clients in Fort Myers, Estero, Cape Coral, Bonita Springs, Naples, FL. His main areas of practice are contract law, construction law, litigation and bankruptcy law.

At Zinn Law, our goal is to provide each of our clients with legal assistance that is accurate, personalized, courteous, and cost-effective.

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