Keeping Your Property During Bankruptcy
Many people considering bankruptcy worry that filing means losing their home, vehicle, savings, or personal belongings. Bankruptcy does not automatically mean giving up everything you own. Depending on your circumstances, bankruptcy exemptions and the type of bankruptcy you file may allow you to protect certain property.
A bankruptcy attorney in Chicago can help you understand how your assets may be treated and what protections may be available before you decide to file.
Can You Keep Your Property After Filing Bankruptcy?
Whether you can keep particular property depends on several factors, including the type and value of the property, the amount of equity you have, applicable bankruptcy exemptions, existing loans or liens, and whether you file Chapter 7 or Chapter 13.
Common property concerns include:
- Your home
- Cars and other vehicles
- Household furniture and belongings
- Bank accounts
- Retirement accounts
- Personal property
- Work-related tools and equipment
- Other financial assets
Reviewing these assets before filing can help you understand what may be protected.
Keeping Property in Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, a trustee reviews your assets and the exemptions claimed in your case. Bankruptcy exemptions may protect certain property or a specified amount of its value.
If an asset is fully protected by an applicable exemption, you may generally be able to keep it. Property with significant nonexempt value may potentially be administered by the bankruptcy trustee for the benefit of creditors.
This is why understanding your property and available exemptions before filing Chapter 7 is particularly important.
Keeping Property in Chapter 13 Bankruptcy
Chapter 13 bankruptcy generally allows eligible individuals to retain their property while making payments through a court-approved repayment plan.
However, the value of property that is not protected by exemptions may affect how much must be paid to unsecured creditors through the plan.
Chapter 13 may therefore be worth considering for individuals who have regular income and are concerned about protecting property while reorganizing their debts.
What About Your Home?
Whether you can keep your home depends on factors such as your equity, mortgage status, applicable exemptions, and the bankruptcy chapter you file.
Homeowners who are current on their mortgage may face different considerations from those who have fallen behind. Chapter 13 may provide some eligible homeowners with an opportunity to address certain past-due mortgage payments through a repayment plan.
Bankruptcy does not eliminate a valid mortgage lien simply because the underlying case is filed.
What About Your Vehicle?
Vehicles are also subject to bankruptcy exemption rules. The amount of equity in your vehicle can be particularly important.
If you have a vehicle loan, you may also need to consider your ongoing payment obligations and other bankruptcy requirements. The available options depend on the vehicle’s value, loan balance, equity, and your particular bankruptcy case.
Understanding Bankruptcy Exemptions
Bankruptcy exemptions play an important role in determining what property may be protected. Illinois law provides exemptions for certain types of property, subject to specific requirements and limits.
Exemption rules can be complicated, and the available protection depends on your individual assets and circumstances.
Understand Your Options Before Filing
If protecting your home, vehicle, savings, or other assets is a major concern, it is important to understand how your property may be treated before filing bankruptcy.
Consider speaking with a Chicago bankruptcy attorney to review your assets, debts, equity, and applicable exemptions and learn whether Chapter 7 or Chapter 13 may provide an appropriate way to address your debt while protecting qualifying property.
