If you’re filing for Chapter 7 bankruptcy, you may want to keep your car or your home. Luckily, you’ve got a few options.
When you file for Chapter 7 bankruptcy protection you’re looking to wipe out debts and keep as much of your property as possible. For you, that may include a home or car.
You’ve got a few things to consider, and some options to help accomplish your goals.
Is It Safe?
When you file for Chapter 7 bankruptcy protection you get to keep property if the equity can be exempted.
For a house, you’ll want to get a fair market valuation or appraisal so that you know how much it’s worth.
If it’s a car you’re looking to keep, make sure you look up the value before filing.
From there, you can see if there’s an exemption to cover the difference between the value and amount due on the mortgage or car note.
Here are some of the useful items on this site about bankruptcy exemptions:
Option 1 – Reaffirmation
Reaffirmation is a new promise to pay a particular debt in spite of the bankruptcy filing.
It’s as if you and the creditor both pretend as if your bankruptcy never happened at all.
Once you sign a reaffirmation agreement and it’s approved by the bankruptcy court, you know for sure that you can keep the property after your Chapter 7 bankruptcy is cover.
Option 2- Redemption
Let’s say you want to keep the car but it’s worth less than the amount due on the loan.
You can ask the court to require the lender to give you clean title in exchange for you paying the current value of the property.
There are limits to how this gets done, but if you can get your hands on a lump-sum payment then it may save you a tidy amount of money.
Option 3 – Surrender
Don’t feel like making payments anyone? Just tell the creditor to pick up the car or foreclose on the house.
That’s “surrender.” It doesn’t mean you’ve given up title (the lender still needs to repossess or foreclose in order for that to happen), it just means you’re offering to give it back.
Once the Chapter 7 bankruptcy discharge is issued by the court, your obligation to make payments is wiped out.
Option 4 – Do Nothing, Keep Paying
Why sign a document or cough up big money you don’t have?
In the old days, you could simply do nothing and continue making payments after your Chapter 7 bankruptcy. The lender got paid, you kept the car or house. It was a classic win-win situation.
Not necessarily so anymore, though. Depending on the type of property, the lender and the specific facts of your case it may not work for you to keep making payments and hope to keep the property.
You and I will need to talk about this option if that’s the one you want to take. The last thing I want to see is a situation that blows up in your face, spoiling your plans.
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