What Property Can Be Owned After Declaring Bankruptcy?

by Beverly Bird

Bankruptcy isn't a death knell for property ownership. In fact, if you file for Chapter 13 protection, your property isn't at risk at all. Chapter 13 establishes a repayment plan, funded by your disposable income and overseen by the court. Your trustee will not liquidate your property. Chapter 7 does involve liquidation, but the bankruptcy code includes provisions that allow you to keep some of what you own.

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Chapter 7 bankruptcy law allows exemptions – protected portions of the value of certain assets. For example, your state might offer a $3,500 exemption for automobiles. If you drive an older vehicle, using this exemption might remove it from the bankruptcy proceedings. If it's worth $3,500 or less, the trustee cannot sell it and you can retain ownership. If you have a loan against your car, you can use the $3,500 to cover your equity and reaffirm the debt. This involves signing a new contract with the lender so the loan survives your bankruptcy proceedings, however. The debt is not discharged.

New Debt

Qualifying for new loans after bankruptcy might be difficult for a while. Your Chapter 7 bankruptcy will stay on your history for 10 years, and a Chapter 13 remains for seven years. In either case, you'll eventually be able to finance, buy and own property again. While you're involved in a Chapter 13 plan, you can't take on any new debt without the approval of the court.