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Bankruptcy Law Blog

Monday, February 26, 2018

What Will I Lose if I File for Bankruptcy?

Will I Lose My House And Car If I File For Bankruptcy?

If we had a nickel for every time a potential client asked us if they would lose their house or their car when they filed for bankruptcy, we could retire. With few exceptions, the answer is no, most people are able to keep their home and their vehicle even if they are deeply in debt. In this blog post we’ll go over the basics of how we help people hold on to the two types of property that people worry about losing the most.

It is easy to understand why people who are filing for bankruptcy are worried about losing their house and their car. For one thing, there are is a lot of misinformation or “fake news” about bankruptcy out there that makes people think they will have to give up all of their assets in order to become debt free. Secondly, the fear of being homeless or losing a car and not being able to drive to work and make money for one’s family is real when you are in dire financial straits.

Fortunately, when they were drafting the bankruptcy laws, our members of Congress thought about this and decided that people should not have to become homeless or give up the tools they need to make a living in order to become debt-free. So, the lawmakers included some exemptions in the bankruptcy laws. By taking advantage of exemptions and continuing to make payments, many debtors are able to keep assets that are important to them.

Debtors filing under Chapter 7 can use their exemptions to pick and choose what assets they want to keep. However, if a debtor has very little equity in an asset (like a car worth $5,000 with a $4,5000 loan) or the asset is underwater (like a car worth $5,000 with a $7,000 loan) the bankruptcy administrator may decide it would be better to sell the asset instead of allowing the debtor to keep it.

Debtors filing under Chapter 13 go into a court-supervised repayment plan for 3 to 5 years, which is designed to help them get caught back up on payments. Houses and cars can be saved from foreclosure or repossession by including them in a Chapter 13 plan. The risk is that after going through bankruptcy, the debtor will again fall behind, so it is important to be realistic about the bankruptcy plan and what debt will remain after the court-supervised repayment period ends.

Making decisions about what chapter to file under, and what assets to try and keep can be very stressful. Hiring an attorney to advise you and then to guide you through the process can be a big help. DIYing the bankruptcy process is possible, but the amount of money you save by not hiring an attorney will cost you a lot of time and energy down the road as you navigate the bankruptcy system.


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”