Just the word “bankruptcy” can be frightening to people already in financial distress. If none of your friends has gone through it—or has talked about it—you can only guess at the consequences.
Many people think filing bankruptcy means giving up all of your assets. So asking what you might have to give up if you file is a very important question. After all, bankruptcy might not be a good option if it means giving up what you own.
The good news is that bankruptcy law allows you to “exempt” assets from the bankruptcy. Those assets are protected from your creditors and you will be able to keep them. Each state allows different exemptions, but in the vast majority of cases, our clients have not had to give up any assets because they filed bankruptcy. It is important to discuss all your assets with your attorney, to ensure your exemptions are used in the best way possible.
There is, however, one important fact to consider. If you still owe money on your home or car, the creditor also has a security interest in the asset. So if you don’t continue making the payment, your lender can foreclose upon your home or repossess your vehicle. Filing bankruptcy usually doesn’t mean you have to give up your home or your car, but it also doesn’t let you keep them without continue making the payments. As long as your mortgage and car payments are affordable, you should be able to keep them. If you are behind on the mortgage, you may be able to file a Chapter 13 bankruptcy to set up a repayment plan to bring the loan current, as well.
If your mortgage payment is unaffordable and you want to keep your home, filing for bankruptcy may not be your best option. A bankruptcy may make it so you don’t have to pay other debts, but if your mortgage payment is still too high, a loan modification might be a better option for you. This can lower your mortgage payment to a more affordable level. Once the loan is modified, you may still want to file a bankruptcy to deal with other debts.
Most clients are able to file bankruptcy and get a fresh start, without losing any assets. If you are current on your home and car payments, you will likely be able to continue making the payments and keep them. If you aren’t current, you may be able to bring your mortgage loan current by filing Chapter 13. If your mortgage loan is simply not affordable, a loan modification might be a better way to keep the home. You can get help with any of these services. A good attorney will work with you to determine which makes the most sense for your individual situation.