If financial hardship has you thinking about filing for bankruptcy, anxiety is your constant companion. Nonetheless, knowledge is power, and gaining an understanding of bankruptcy can empower you to start pushing past the fear. Personal bankruptcy usually takes one of two routes:
- Chapter 7: A trustee evaluates your possessions, sets aside items protected by state law and decides whether to sell the non-exempt items to discharge your debts. Your eligible debts are then discharged.
- Chapter 13: A multi-year payment plan is initiated after your debt is restructured and your monthly payments are made manageable.
With those basics, you can confront the question that is likely costing you sleep: What will I lose? Many Chapter 7 filers are concerned that by initiating a “liquidation bankruptcy” that they will lose everything. It is important to know that you won’t lose everything if you file for bankruptcy. As an experienced Hartford, CT Chapter 7 bankruptcy lawyer – including those who practice at The Law Offices of Neil Crane – can confirm, it is rare that anyone who is eligible for Chapter 7 bankruptcy relief loses much of their property during this process. Although the risk is there, it just doesn’t happen very often.
Will I Lose My House?
Most bankruptcy filers keep their houses. In a Chapter 7 filing, the amount of unprotected home equity will determine your ability to retain your house. If your home equity substantially exceeds the amount protected by the state exemption limit, your bankruptcy trustee may sell the property to discharge your debts. With a Chapter 13 proceeding, bankruptcy filers who stay with their repayment plan keep their primary residence.
Will I Lose My Car?
If you own your car outright and the current market value is within the state’s exemption limit, you can keep the vehicle. If you owe payments on your auto, redemption is an option. To redeem your car, you would pay your lender a lump sum equal to the vehicle’s current market value.
If you can’t afford a redemption payment and are current on your payments, a reaffirmation agreement with your lender becomes an option. With this agreement, you keep your car and continue your monthly installments. If you are behind on your payments, your vehicle is at greater risk. A reaffirmation agreement remains an option, but your lender has the right to take your vehicle. An attorney can approve a reaffirmation agreement and allow you to bypass a court hearing.
Will I Lose My Prized Possessions?
Every state has exemptions that protect a great deal of personal property. Sentimental items that have little market value are generally safe. Easy-to-sell collectibles that break the exemption limit are a different story.
The best move for anyone contemplating bankruptcy is to consult a lawyer specializing in this branch of law. A bankruptcy attorney can spell out your options and help you chart a course back to solvency. Replace anxiety with action, and schedule a consultation.