Can I Keep My Car & Home?
There are variables for chapter 13 and chapter 7, as well as considerations as to the equity one has in a home and car. At times it may even be better to let a car go if the value of the car is much lower than the total amount owed. Calling a bankruptcy attorney in Vancouver WA is the best way to sort out the details, but here are some items to consider.
One term to keep in mind is exemption. An exemption is a protected asset that is excluded from the bankruptcy. The amount of equity in a home may determine whether it can be exempt or not. It will also determine whether chapter 7 or chapter 13 is the better option.
Chapter 13 Bankruptcy
In chapter 13 bankruptcy a repayment plan is set up to pay a percentage of the total debt. This is generally the best bet for people who have fallen behind on payments. The repayment plan will allow an individual time to get caught up on payments, while the home is protected from foreclosure.
If home and car payments are current, and are able to remain current, they are normally left alone. The repayment plan also has to ensure that creditors receive an equal payment to what they would have received under a chapter 7 filing.
If the value of a car is upside down it may be best to let the lender repossess the vehicle. The car will be sold and the difference between what the lender recoups versus what is still owed will become part of the unsecured debt. Unsecured debt is paid back in a small percentage while the remaining balance is discharged.
There is also the possibility of a cramdown, which means the vehicle loan is reduced to the amount owed. That amount is then included in the repayment plan and the vehicle remains in the debtors possession.
Chapter 7 Bankruptcy
If there is no equity in a home it will generally qualify for exemption. If a home or vehicle is not exempt the bankruptcy lender can sell them and apply the proceeds toward the debt repayment. Some equity in a home or vehicle are often allowed as exemptions in chapter 7 bankruptcy. If the amount of equity is high the likelihood that some or all of it will be nonexempt increases.
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