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.

Exemptions

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.

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Can I Convert to a Chapter 7 Without Losing My House or Car?
 

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Can They Take My Car in a Private Bankruptcy in the US?

The vast majority of consumers file for bankruptcy under Chapter 7 or Chapter 13. Chapter 7 bankruptcy allows the court to sell any item that is not exempt under the bankruptcy laws and to distribute the proceeds from that sale to the debtor’s unsecured creditors. Chapter 13 requires debtors to make monthly payments to pay down the debts owed. The Chapter 7 process takes approximately 90 days to complete, while the Chapter 13 process typically takes between 3 and 5 years. At the end of both processes, all but certain legally excepted debts will be discharged. Since Chapter 13 involves paying down debts, you are most at risk of losing your car under Chapter 7. However, there are some ways of holding onto it.

Will I Lose My Car if My Chapter 13 Is Dismissed?

Vehicles are one type of asset the court can address during Chapter 13 bankruptcy, but a dismissal won’t necessarily affect your ownership of a vehicle that has been paid off. Since the only creditor who can repossess your vehicle is the one who holds the loan on it, none of your other creditors can take your car. However, if your case is dismissed, you may have to sell some of your assets, including your car, to raise the cash to pay your remaining debts.

What Does a Chapter 7 Statement of Intention Mean?

Unlike Chapter 13 bankruptcy where you repay most of your debts to your creditors, most debts are forgiven under a Chapter 7 bankruptcy after some of your assets are seized and sold. For the court to determine which assets are to be liquidated, you must submit a Statement of Intention that explains how you propose to maintain or dispose of your property.

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