Although there are many reasons that individuals may have to file a Bankruptcy case, including medical debt, foreclosure, wage garnishment, and other reasons, the one question important to all of them is will they lose any of their property in the case and what will they get to keep. Often people have visions of moving men coming to their house and loading up all their possessions on a truck, but this could not be further from the truth. The reality is that the overwhelming majority of people filing consumer Bankruptcy cases will not lose any property at all in the case. The one caveat to that is that in order to keep a house or vehicles that have outstanding loans, you will need to keep making payments and make up any missed payments either in a Chapter 13 Plan or through an agreement with the lender. Let’s take a brief look at how your property might be treated in a Chapter 7 or Chapter 13 case:
Chapter 7: Even though Chapter 7 is sometimes inaccurately called “liquidation,” very few people have any assets “liquidated” in a case because virtually all consumer cases (more than 90%) are “no asset cases.” Exemptions will protect most of the average person’s personal property, Most homeowners will not have enough equity for the Trustee to consider selling it, and Trustees are rarely interested in selling personal property unless it has significant value (ie, boats, expensive antiques or musical instruments, etc.). It is expensive and time consumer for a Chapter 7 Trustee to keep a case open for month or years unless there is several thousands dollars available in the case. I have had cases in which the Trustee ignored a couple thousand dollars of nonexempt cash in a bank account because it costs more than that to keep a case open. As mentioned, if you are making payments on a house or cars, you will need to continue making those payments even after your discharge, and make a deal to make up any missed payments or modify the loan. Lenders want your money, and not your house, even if you make the wise choice to not reaffirm.
Chapter 13: In a Chapter 13 case, the trade off for making plan payments is that you generally get to keep your exempt and nonexempt property. Unlike the Chapter 7 Trustee, the Chapter 13 Trustee typically does not liquidate assets. Like Chapter 7, to keep your home and vehicles you still have to keep making your regular monthly payments, but unlike Chapter 7, the Chapter 13 Plan will allow you to make up missed payments through the term of the Plan so that when you have completed the case you are all caught up.
If you are reading this post, it probably means you have thought about the possibility of filing a Bankruptcy case. Hopefully you have some comfort in knowing the moving van is not going to back up to your house. However, general information is no substitute for a meeting with a good Bankruptcy lawyer who can review your assets and quickly tell you if you have property at risk. If you are in Metro Atlanta, or in Georgia, and want to speak with an experienced Bankruptcy lawyer, just let us know through the contact page here, or just call us in the office (404-815-0164).