What Will Happen to My Home and Car If I File Bankruptcy?

Can I keep my home in bankruptcy?

In most cases, you will not lose your home or car during bankruptcy as long as your equity in the property is fully exempt. Even if your property isn’t fully exempt, you’ll still be able to keep it if you pay its non-exempt value to creditors under your Chapter 13 plan.

Some of your creditors may have a security interest in your home, automobile, or other personal property (called “secured debt”). This means that you gave the creditor a mortgage on your home or put your other property up as collateral for the debt. Bankruptcy cannot make these security interests go away. If you default on that debt, the creditor may be able to repossess your property or foreclose on your home during or after the bankruptcy case.

However, when you file Chapter 13 bankruptcy, you may be able to keep secured property by paying the creditor the value of the property rather than the full amount owed on the debt. Or you can use Chapter 13 to catch up on back payments and get current on the loan.

There are also several ways that you can keep your car or home after you file a Chapter 7 bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the legitimacy of the debt. For example, if you used your household goods as collateral for a loan (other than a loan used to purchase the goods), you can usually keep your property without making any more payments on that debt.