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What Will Happen to My Home and Car If I File Bankruptcy?
In most cases you will not lose your home or car during your BK case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in a chapter 13.
Some of your creditors may have a “security interest” in your home, automobile or other personal property. This means that you gave that creditor a mortgage or put up some other property as collateral for the debt. BK does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the BK case.
These are several ways that you can keep collateral or mortgaged property after you file BK. You can agree to keep making your payments on the debt until it is paid in full or you can pay the creditor the value of the property you want to keep. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep property without making any more payments on that debt.
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Member, National Assoc of Consumer Bankruptcy Attorneys
Member, Middle District Bankruptcy Bar Association