Can I file Chapter 13 if I have equity on my house for $150k and owe $80k for credit cards?
Generally, you can keep your property, such as your home and vehicles when filing bankruptcy, but there are several countervailing considerations that prevent an absolute “yes” or “no” answer. There are two basic types of consumer bankruptcy, Chapter 13 and Chapter 7, each with different requirements regarding the debtor’s property. For more information about the types of bankruptcy, you should visit the Bills.com bankruptcy page.
In most cases, you can safely file Chapter 13 and keep all of your property if you continue making regular payments on your home and vehicles while you are paying your other creditors through the Chapter 13 Plan. Of course, the reasonableness of the debtor’s assets and repayment plan is always an unwritten qualification; a bankruptcy judge is not going to allow a debtor to come into court with five luxury homes and expect his unsecured creditors to wait for payment while he pays five mortgages outside of the bankruptcy plan.
Chapter 7 bankruptcy, also called liquidation bankruptcy, allows a debtor to discharge most unsecured debts. The major limitation to keeping property in a Chapter 7 is the property exemption limits provided by your particular state's laws. Some states' exemptions are generous while others are strict. In fact, some individuals with lots of cash and property move to a different state, usually Texas or Florida, before filing for Chapter 7 protection to take advantage of those states- generous exemptions.
When you have your first consultation with your bankruptcy attorney, you should come in with a set of goals and priorities. Tell the attorney, "I need to file bankruptcy, but I do not want to if there’s a chance that I’ll lose my house or car." At that point, let him figure how to meet your expectations. None of the exemption amounts are absolute, so he will estimate your property values using an allowable standard most favorable to you so that the statutory limits are not a problem. For more information about your state's exemption amounts, you can visit BCSAlliance.com.
For consumers considering bankruptcy, the most important piece of advice I can offer is to find an experienced and well respected bankruptcy attorney. A good attorney will be able to fully analyze your circumstances and help you decide if bankruptcy is the right choice for you, and if so which chapter you should file. A good lawyer will also be able to design a plan that will preserve your assets to the greatest extent possible. Also, the amount of debt you have should not affect your ability to file bankruptcy, except that it may change which chapter is best for you depending on your income — this is an issue which you should discuss with your attorney.
You must carefully weigh your options before deciding to file bankruptcy, but you should know that it is extremely rare for a debtor to lose possession and ownership of any property he wants to keep, especially the family home or vehicle. To learn more about bankruptcy, I encourage you to explore the Bills.com bankruptcy page.
Hopefully this information will allow you to be better informed when discussing bankruptcy with an attorney, and help you Find. Learn. Save.