Filing for bankruptcy doesn’t mean giving up all your possessions. You can keep certain types of property when you file for bankruptcy. This is called “exempt” property and includes items such as:
Your home
A vehicle
Clothing
Household goods
Tools of your trade
You can also keep any property that is secured by a loan that you are still paying off such as a car or a house. This is because the lender still has a security interest in the property and can repossess it if you stop making payments.
If you want to keep a car or a house that is not fully paid off you will need to continue making the payments on the loan. You will also need to tell the bankruptcy trustee about the loan and the property. The trustee will then decide if the payments should be made through the bankruptcy estate or if you should continue to make the payments yourself.
You may be able to keep a car if the value of the car is less than the amount you owe on the loan. This is called “upside down” on the loan. If you are upside down on the loan you will need to continue making the payments. You may also need to put up additional collateral such as another car to secure the loan.
If you want to keep a leased car you will need to continue making the payments and tell the bankruptcy trustee about the lease. The trustee may require you to get the approval of the leasing company before you can keep the car.
You can keep a car if it is essential for your job. For example if you are a salesperson and you need a car to get to your customers you will be able to keep the car.
You can also keep a car if you need it for transportation to job interviews medical appointments or school.
You will need to continue making the payments on any car loans and tell the bankruptcy trustee about the loans. The trustee may require you to get the approval of the lender before you can keep the car.
If you want to keep a house you will need to continue making the mortgage payments and tell the bankruptcy trustee about the house. The trustee may require you to get the approval of the lender before you can keep the house.
You may be able to keep a house if the value of the house is less than the amount you owe on the mortgage. This is called “upside down” on the mortgage. If you are upside down on the mortgage you will need to continue making the payments. You may also need to put up additional collateral such as another house to secure the mortgage.
If you want to keep a house that is not fully paid off you will need to continue making the payments on the mortgage and tell the bankruptcy trustee about the mortgage. The trustee will then decide if the payments should be made through the bankruptcy estate or if you should continue to make the payments yourself.
You can keep household goods such as furniture appliances and clothing. You can also keep tools that you need for your job such as a computer printer and fax machine.
You can’t keep luxury items such as a boat a second car a snowmobile or a fur coat.
You will need to tell the bankruptcy trustee about any property that you want to keep. The trustee will then decide if the property is exempt.
If you have any questions about whether you can keep a particular item of property you should speak to a bankruptcy lawyer.
Can I declare bankruptcy and keep my car?
Yes you may be able to keep your car if you file for bankruptcy.
How will bankruptcy affect my car loan?
Filing for bankruptcy may discharge your car loan debt meaning you will no longer be required to make payments on the loan.
Can I continue to make payments on my car loan after I declare bankruptcy?
You may choose to continue making payments on your car loan after you declare bankruptcy but you are not required to do so.
What happens if I don’t make payments on my car loan after I declare bankruptcy?
If you don’t make payments on your car loan after you declare bankruptcy your car may be repossessed.
Can I reaffirm my car loan after I declare bankruptcy?
You may choose to reaffirm your car loan after you declare bankruptcy which means you agree to continue making payments on the loan and the loan debt will not be discharged.
What is a cramdown?
A cramdown is when the court approves a new loan for the value of your car which may be less than what you owe on the loan.
How does a cramdown work?
If you owe more on your car loan than your car is worth you may be able to get a new loan for the value of your car through a cramdown.
This new loan will have a lower interest rate and may be spread out over a longer period of time.
What is a voluntary surrender?
A voluntary surrender is when you return your car to the lender because you can’t afford to make the payments.
What is a involuntary surrender?
An involuntary surrender is when the lender repossesses your car because you have not made the payments.
What happens if I voluntary surrender my car?
If you voluntary surrender your car you will no longer be responsible for making payments on the loan.
What happens if I involuntary surrender my car?
If you involuntary surrender your car the lender may sell the car and use the proceeds to pay off your loan.
What is a redemption?
A redemption is when you pay the lender the full amount owed on the loan in order to keep your car.
How does a redemption work?
If you want to keep your car after you declare bankruptcy you will need to pay the lender the full amount owed on the loan.
What are the benefits of a redemption?
The benefits of a redemption are that you can keep your car and avoid having it repossessed.
What are the drawbacks of a redemption?
The drawbacks of a redemption are that you will need to come up with the full amount owed on the loan which can be difficult to do.
