Is it possible to file bankruptcy and still keep your house and cars?

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Is it possible to file bankruptcy and still keep your house and cars?

We owe approximately $50,000 in loans and credit card debt and have $8,000 in hospital bills to pay with another $3,000 in hospital bills coming in the future. We have had most of this debt for years and have tried to pay it and just can’t do it anymore. We can’t get anywhere with it and need to know if we can file bankruptcy and still keep our house and cars?

Asked on April 4, 2012 under Bankruptcy Law, North Carolina

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

There is no easy answer to your question, it depends on:

1) Do you own the home and cars outright, or are they financed (e.g. mortgage,  auto loan)? If they are financed, then those debts are secured debts; even in bankruptcy, you have to pay secured debts or else the lender has the right to foreclose or reposses (though the bankruptcy would prevent the lender from suing you personally for any remaining amounts due on the loan; the "only" thing the lender can do is take the property). So if you do not own these assets outright, you have to keep paying them.

(Note: the above is slight oversimplication, but the essential point--pay on secured debt, or lose the property securing the debt--is correct.)

2) In a chapter 7 bankruptcy, your assets--including possibly real estate and vehicles--are potentially subject to being liquidated (sold) for the benefit of creditors; however, a chapter 13 bankruptcy involves setting up a stict payment plan and paying creditors over the next 3 - 5 years, not selling your assets. Thus, depending on the type of bankruptcy you file, your home and cars could potentially be liquidated for the benefit of creditors, but they don't have to be.

There are many complexities to bankruptcy--the interaction of secured debt and ch. 7 (liquidation) bankruptcy, for example, or the fact that certain assets are exempts from liquidation in bankruptcy. If you are contemplating bankruptcy, you should consult with a bankrutpcy lawyer to understand your options and how the laws affect your specific situation.


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