How Will Filing Bankruptcy Impact My Home and Car Loans?

When you are looking at filing for bankruptcy, a number of thoughts go through your mind. What are you going to do? Will you still have a house to live in? What will it do to your credit? Most importantly, what will it do to your home and car loans? We will address both of these in one shot here, as they are very similar. This article assumes that you have taken out a loan of some kind and you are paying on it to keep the item/property in question. First of all, check out the car.

You May Get to Keep the Car

There are many people who file for bankruptcy and are able to keep the car during the case, and sometimes even after the case. If you are using the car to get to and from work, you have a better chance of keeping it. That being said, don’t rush to transfer the car out of your name just before you file bankruptcy. That is not only dishonest, it is illegal.

If you are behind on your payments you may believe it is cause for concern, but there is still a very good chance that you will not actually lose the vehicle. On the contrary, you can use bankruptcy laws to keep your vehicle, believe it or not. The following points address vehicles that you are either currently paying for or own outright.

• Automatic Stay – This is a function that will stop repossession, and it goes into effect right after you file bankruptcy.
• Chapter 13 – Under this chapter, you might be able to refinance your loan or at least lower the payments. This will stave off the collectors and allow you to keep your vehicle.
• Chapter 7 Exemption – This is simply designed to stop your car from becoming the victim of a forced sale.

Your Home After Bankruptcy

So you know what happens to your car after bankruptcy, but what about your home? Will you still have a place to live? The answer, as with anything else in bankruptcy, is up in the air. The court does have the power to administer all of your property as it becomes property once you file, but if your home has no equity, it will most likely not be sold. In addition to that, the homestead exemption may actually exempt any equity you have in your home which will prevent the trustee from making the sale. Remember, every case is different and yours may vary, educate yourself on the matter before you file!

Filing bankruptcy can seem scary at first but it certainly does not have to be. The more you prepare yourself, the better off you are going to be. Don’t worry, there are plenty of ways in which you can keep your vehicle and come out on top. Remember, many of the bankruptcy myths have no merit, and the system can be worked with if you know what you’re doing!