Yes, in most cases, you can keep your house and car when you file for Chapter 13 bankruptcy. This is a primary reason many people choose this specific type of bankruptcy. It's designed for individuals with a regular income to create a court-approved repayment plan, typically lasting three to five years. This plan allows you to catch up on missed mortgage and car loan payments over time, while keeping your property, as long as you continue making the plan payments and your current payments.
The key to keeping your assets hinges on the specifics of your repayment plan and the equity you have in the property. For your car, if the loan is recent (often within 910 days for a purchase), the entire loan amount must be repaid through the plan. For older loans, you may only need to pay the car's current market value. Your home mortgage is treated similarly; you must repay the arrears through the plan while staying current on ongoing payments.
It is critical to understand that the law has specific limits on the value of assets you can protect, known as exemptions. These vary significantly by state. If the equity in your home or car exceeds your state's exemption limits, the bankruptcy trustee could require you to pay the difference to your unsecured creditors through your plan.
Crucial Considerations:
- Equity Exemption Limits: You must be able to exempt the equity in your assets under state or federal law.
- Repayment Plan Compliance: You must faithfully make all payments required by your Chapter 13 plan.
- Current Payments: You must continue making your regular mortgage and car payments on time during the bankruptcy process.
Ultimately, while Chapter 13 provides a powerful path to protect your home and car, its success depends entirely on your ability to fund the court-approved repayment plan. Consulting with a qualified bankruptcy attorney is not just recommended; it is essential to navigate the complex exemptions and requirements specific to your financial situation and state laws.
