Will I be able to keep my house and car if I file bankruptcy?

This depends upon a number of factors, including whether the mortgage or car loan is paid up to date, the Chapter under which you file your petition, and how much equity you have in your house or car.

Secured creditors, such as banks who hold mortgages and automobile financing companies, have a right to repossess the secured property if you don’t pay the debt.  In a bankruptcy, secured creditors may be able to repossess the property in which they hold a security interest, unless the debtor either “redeems” the property by paying the amount of the loan that is secured by the property or “reaffirms” the debt, which means signing an agreement after filing the bankruptcy petition.  By reaffirming the debt, a debtor gives up the right to discharge  the reaffirmed debt, but gets to keep the secured property.

If you are behind on your mortgage payments but want to keep the house, and if your disposable income is sufficient to pass the “means test” filing under Chapter 13 will permit you to pay off your mortgage arrearage as part of your monthly plan payments.  Once your plan is accepted by the court, then as long as you make all the plan payments (and stay current on your ongoing mortgage payments), you should be able to keep your house.  By contrast, if you file Chapter 7, your mortgage lender can repossess the house to satisfy the debt.

If your mortgage is paid up to date, but you are behind on payments to unsecured creditors such as credit card companies, then whether you can keep your house or car will depend on how much equity you have in them.  In North Carolina, an individual who has more than $18,500 in equity in their house can claim all of that equity as an exemption.  In this case, a sale of the house by the trustee would not produce any net proceeds for distribution to unsecured creditors by the trustee under Chapter 7.  Assuming that you meet the income requirements for filing Chapter 7, you could choose either Chapter 7 or Chapter 13 and not lose your house.  If, on the other hand, you have enough equity in your house to make a sale of your house beneficial to your unsecured creditors, then if you want to keep your house you should file under Chapter 13 if you otherwise qualify to do so.  For motor vehicles, the individual exemption is $3,500, but depending on how much of the $18,500 home stead exemption is used, you may be able to exempt an additional $5,000 in the value of one motor vehicle under the “wild card” exemption.

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