Most people who file Chapter 7 Bankruptcy find that they can keep everything they own. This is because the law makes allowances for things you need to start a new life, such as a modest car, clothing, and household goods like furniture and dishes. If you have any unusually valuable items, you may still be able to use exemptions to cover them. In Washington State, you can exempt up to $125,000 in equity in your home, so most homeowners who have some equity find that they can still keep their homes in Chapter 7 Bankruptcy. If you are worried about losing property that you own in Bankruptcy, it is very important that you speak with a qualified attorney about your situation before taking any actions to protect or hide your property. This area of the law is full of potential problems that can result in serious legal consequences for you (the filer) and other people involved.
I have a car loan. Can I keep my car if I file Chapter 7 Bankruptcy?
If you have a loan for property such as a car, boat, motorcycle, or home electronics, you must continue to make payments if you want to keep the property. If you are current on payments, some creditors may allow you to keep the property even though you filed Chapter 7 Bankruptcy. However, some creditors may demand that you sign a reaffirmation agreement to keep possession of the property. A reaffirmation agreement is a contract that is filed with the court in which you agree that you continue to owe the debt for property (car, boat, etc) that the reaffirmed loan is for. A reaffirmation agreement means that this debt will not be discharged in Bankruptcy. If your budget is too tight or if the loan payments are too much, the court may not approve the reaffirmation agreement. Most debtors have no problem reaffirming one car loan (or one each in the case of joint Bankruptcy filings) if it is in their best interest to keep the car.
I have a mortgage. Can I keep my house if I file Chapter 7 Bankruptcy?
As with other secured debts, you must keep current on the payments if you want to keep your house in a Chapter 7 Bankruptcy. However, unlike with other property (cars, boats, and appliances) you cannot lose your house if you refuse to sign a reaffirmation agreement. Your personal obligation is discharged when you file Chapter 7, so if the house is later foreclosed on, you won't owe a deficiency on the loan. There may be other reasons to sign a reaffirmation agreement with your mortgage lender. Your attorney can advise you on the best course of action in your case.
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