Can I Keep My Car and House After Bankruptcy?

How your vehicle and your home are dealt with during a bankruptcy proceeding depends on the exemption scheme selected. Let’s take a look at your vehicle first. You need something that’ll get you back and forth to work because that paycheck is going to help get your financial situation back on track.

Usually you’ll be allowed to keep a vehicle when its equity does not exceed the chosen exemption scheme’s allowable exemption. This exemption can range anywhere between $1,200 and $9,100. The Kelly Blue Book is a reliable source for helping determine equity as is any similar guide. Just subtract the amount that you owe on the vehicle from the vehicle’s value, and that sum is the car’s equity.

Since leased vehicles usually have no equity, they’re fully exempt. Likewise, a functional and practical vehicle on which you owe $8,000 but is worth around $10,000 is something you’ll probably be allowed to keep. But you probably won’t be allowed to keep a valuable classic car that you’ve paid off.

When allowed to keep a vehicle, whether leased or not, and you owe money on that vehicle, you are still required to make regular payments. You will have to reaffirm or redeem the vehicle before you’ll be allowed to keep it. Take advantage of this opportunity by giving your representative permission to renegotiate payment terms into something more beneficial.

When it comes to your home, up to $100,000 in equity can be exempted. Again, the amount depends on which exemption scheme you choose. There are several factors you can use when calculating the value of your home. However, while in bankruptcy, base value not on optimal selling conditions but rather on the forced liquidation of the property. If the real estate market currently is depressed, the value of a liquidated property will not be as high as you think. Add together the balance of your mortgage plus closing costs and then subtract this sum from the home’s value to determine equity.

Disclaimer: The general information presented here relates to Chapter 7 consumer bankruptcy. This discussion is incomplete and does not involve consumer debt restructuring as defined under Chapter 13 bankruptcy; a different type of bankruptcy filing. The information presented is not meant as a legal opinion and should not be used as a substitute for legal advice. For detailed information regarding Chapter 7 consumer bankruptcy, refer to your state’s bankruptcy laws. For specific and complete information regarding how state bankruptcy laws affect your personal situation, it is advisable to seek independent legal representation.