How to File Bankruptcy & Keep My Car & Home
Filing bankruptcy is usually the last resort for individuals with too much debt. Bankruptcies are noted on credit reports for 10 years, during which time it may be difficult if not impossible to obtain credit to purchase a home or car. Additionally, assets are placed in a "bankruptcy estate" upon filing, and the bankruptcy trustee may use these assets to help pay creditors. Fortunately, most states usually offer some level of protection for homes and vehicles during the bankruptcy process.
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Instructions
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Choose Chapter 7 or Chapter 13 bankruptcy. In Chapter 13 bankruptcy you will work out a payment plan with the courts regarding your creditors. A Chapter 7 bankruptcy is essentially a liquidation, where most of your non-exempt assets will be used to pay creditors.
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Consult your state exemptions. Each state has a list of assets that are exempt from your bankruptcy estate, meaning they cannot be touched by creditors. Usually, the largest available exemption is the homestead exemption.
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Look for wild card exemptions. Some states, such as California, allow you to use any excess amount of your homestead exemption for any other property, up to a certain limit. If you are only renting a home, you may have a substantial exemption available for your vehicle, along with any other property.
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Complete your bankruptcy exemption paperwork. Each state has a different bankruptcy schedule to complete, but all will ask you to list your assets and the amount of the exemption you are claiming.
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Pay the amount of your non-exempt home equity. If the value of your house is too large to fully exempt under your state's bankruptcy schedules, you can pay the trustee the amount that the home exceeds the exemption amount to keep the house. You will have to continue making all of your mortgage payments or you may still be subject to foreclosure.
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Pay the amount of your non-exempt car value. As with a home, if your car value exceeds your state exemption limits, you can essentially "buy it back" from the bankruptcy trustee by paying the amount of the excess value.
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Consider filing Chapter 13 bankruptcy. If you have filed Chapter 7 bankruptcy and you are not able to keep your home and car, you can switch you filing to Chapter 13. Usually, the bankruptcy court will allow you to keep these assets if you can arrange a 3-to-5 year payment plan that would satisfy your creditors.
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References
- Bankruptcy-America: Qualification for Chapter 7 Bankruptcy
- Mortgage Fit: Chapter 7 Bankruptcy Filing and Exemptions
- Personal Bankruptcy Information: Can I Keep My Home and/or Car After I File Bankruptcy?
- Moran Law Group: California State Exemptions
- United States Bankruptcy Court: How to File Bankruptcy
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