HOW TO KEEP YOUR HOME AND MOTOR VEHICLES IN BANKRUPTCY
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If you are not behind on your mortgage payment(s) or motor vehicle payment(s), you can typically keep these properties even though you have filed for bankruptcy.
The Homestead Exemption
As of July 22, 2007, you can have up to $125,000 of equity in your primary residence and exempt your home from creditors in a bankruptcy proceeding; meaning, you can keep your home. If you do not know whether or not you have more or less than $125,000 of equity in your home, our office can help you obtain an accurate market value of your property.
Equity in Your Motor Vehicle
Most people who have a car loan have negative equity in the loan: they owe more than the car is worth. Most filers who own their cars, motorcycle or trucks free and clear own older vehicles that have very little value. However, if you own your vehicle free and clear and it is worth more than about $3,000 or your vehicle is valued at more than $3,000 than the amount you owe on it, the vehicle may not be exempt and can be taken by the bankruptcy trustee to pay the creditors a portion of what you owe them. In such a case, you will have to pay the trustee the difference between the value of the vehicle and approximately $3,000 or so in order to keep your vehicle from being taken by the bankruptcy trustee.
If equity is not an issue, you may continue to pay your mortgage or your car loan and keep the house or car by signing a "reaffirmation agreement". In effect, the reaffirmation agreement takes the place of your original agreement and essentially makes it as though you have not filed a bankruptcy on those particular loans.
A Chapter 7 bankruptcy also gives you an option to redeem your vehicle. This process involves you paying the secured creditor the current fair market value of the collateral. In exchange, the creditor provides you with release their lien.