Qualifying For State Exemptions
The state you file for bankruptcy in is usually determined by the state you have lived in for the past two years.
If you haven’t lived in any state for at least two years, however, your place of âresidenceâ will likely be the place where you spent the majority of your time for the six months leading up to two years ago.
Hereâs an example: Say you have been living in Arkansas for the past year and a half. Before living in Arkansas, you lived exclusively in Texas for 4 years. Because you haven’t been living in Arkansas for the required two years, you will be counted as a Texas resident.
This means that you will choose between Texas’ Chapter 7 bankruptcy exemptions or the federal bankruptcy exemptions.
How You Can Keep Your House Through Chapter 7 Or Chapter 13 Bankruptcy
The most common types of consumer bankruptcy are Chapter 7 and Chapter 13. Once bankruptcy is filed, an automatic stay an order from the bankruptcy court that prevents creditors from trying to collect while the court oversees the bankruptcy case goes into effect. This automatic stay will stop foreclosure on your home, lawsuits, garnishments, and harassing collection calls. The stay lasts only until the bankruptcy proceedings are complete, but it will give you some breathing room; and if you can eventually continue to make mortgage payments, you will not lose your home.
1. Chapter 7 bankruptcy, is the most popular type of bankruptcy. It is quick and gives you a fresh start as it will eliminate many debts, including those for credit cards, and you usually can keep your home.
There are some reasons why you can lose your home or other property in Chapter 7. This can happen if:
- you have stopped paying your mortgage or loan and cannot continue to pay it
- your house is valued over the exemption limits for a Chapter 7
However, you will be able to keep your home if you have been making your payments and can continue to make them in the future. You may also be able to keep your house through using exemptions.
What Type Of Bankruptcy Is Right For Me In Pennsylvania
As a debtor, it is easy to feel lost and hopeless, especially when going through bankruptcy. Bankruptcy can help you get rid of debt or restructure your finances though a plan depending on the chapter you file under. If you want to protect your house, that might affect which chapter you choose.
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Asset Conversion That Could Be Considered Fraud
Converting nonexempt assets into exempt property in bad faith or with the intent to hinder or defraud your creditors can rise to the level of bankruptcy fraud. Each bankruptcy jurisdiction has its own opinion regarding the type of exemption planning that is permissible.
When analyzing whether your actions constitute fraud, courts consider:
How Does Chapter 7 Bankruptcy Affect My Existing Mortgage
When you file Chapter 7, your existing property will be deemed either exempt or nonexempt. Exempt means youll be able to keep the property throughout the bankruptcy process, as long as you can catch up and stay current on your payments.
Nonexempt means you will either be required to surrender the property or pay its value in cash as a part of the bankruptcy. In some cases, people are allowed to keep nonexempt properties. It all depends on the bankruptcy trustee and how they choose to handle the property.
To understand how Chapter 7 impacts your existing home mortgage, you must first understand the difference between a loan and a lien.
When you get a mortgage, your mortgage company gives you a loan. They let you borrow money in order to buy a property. When they do that, they place a lien on the property. A lien is a right or interest in the property that the mortgage company has until the debt is paid in full.
When you file Chapter 7, you are no longer legally obligated to repay the loan. Legally obligated is the key phrase here because Chapter 7 does not get rid of the lien on the property. Your lender still has a right to the property if the debt is not paid.
So basically, you dont have to pay your mortgage. But if you dont you will lose your property because your lender will likely enforce the lien they have. If you are able to keep your home as part of Chapter 7, its probably a good idea to do everything in your power to keep paying your mortgage loan.
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File A Consumer Proposal And Keep Everything
If you have assets that may be subject to seizure in a bankruptcy because they are not exempt, or because their value exceeds the permitted exemption limits, you may want to consider a consumer proposal as an alternative to bankruptcy.
One of the primary benefits of a consumer proposal is that you keep all your assets. As a negotiated settlement arrangement, you make payments to repay a portion of your debt.; Your creditors receive the value of these payments, you keep what you own.
Different Ways To File For Bankruptcy
Bankruptcy is a process in which the court decides what the best route is for a person with overwhelming debt to pay as much as possible, given their assets. The solution may be Chapter 7, which discharges debts but also liquidates assets, though not all, of a persons assets. Chapter 13 bankruptcy allows a person to keep their assets, but puts them on a strict repayment plan.
No matter which type you file for, the court puts an automatic stay on any foreclosure action. This means that if your house was being foreclosed on, that procedure will stop as the court sorts out your ability to pay. It doesnt mean, however, you automatically keep your house.
In both types of bankruptcy, there is a homestead exemption, a way to protect some of the equity you have built. Its another element of bankruptcy designed to make it more possible to keep your house. Each type of bankruptcy is a totally different process, but in each, the idea behind exemptions is that the person needs to protect some important assets in order to get by. There are also exemptions for keeping your car and other necessary items. The amounts vary by state, but the types of things you can exempt are limited to what you need to get by. Luxury items are not on the list.
You are required to have lived in a state, in that house, for 40 months, in general, to claim a state exemption. Check with your state rules to see what the details are.
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Unsecured Vs Secured Debts
It is important to remember that bankruptcy does not relieve your obligation to cover secured debts. The point of bankruptcy is to offer financial freedom by forgiving unsecured debt. On the other hand, secured debt is previous obligations that you must pay regardless of your financial status:
- Unsecured Debt: Types of loans where the lender has no recourse to come after your assets, like a car or home.
- Secured Debt: Types of loans where you not only agree to make payments, but the lender may come after your assets if you fail to make payments.
A secured lender may take your property and sell it to satisfy the loan in the event of a default. Filing for bankruptcy does not relieve you of secured debts unless you agree to surrender the property that serves as collateral for the loan.
Consequently, victims of bankruptcy can only keep their house and car if they can still afford to make the monthly payments on the loans.
Can You Keep Your House Or Car After Filing For Bankruptcy
When good people fall on hard times and begin considering getting a fresh start through bankruptcy, perhaps the most feared potential losses are ones house and car. Transportation has become a necessity in terms of gainful employment and everyone needs a roof over their heads.
In Virginia, the law allows for a variety of bankruptcy exemptions and with the help of an experienced personal bankruptcy attorney, you may be able to keep your house and car. At the Law Office of Rebecca L. Evans, we work with everyday people just like you to help them get the fresh start they deserve. We wont judge you, criticize you or talk down to you we have your best interest in mind and work with the sole purpose of helping you make your life better.
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Bankruptcy And Assets: Which Are Exempt
Every province and territory in Canada has its own list of exemptions, designed to leave you with enough resources to make a fresh financial start.
In Canada, the federal Bankruptcy and Insolvency Act defines three kinds of exemptions:
- Property you hold in trust for other persons.
- GST credit payments and prescribed payments relating to your familys essential needs.
- Other exempt property defined by the province or territory in which you live.
What are your likely exemptions? What can you keep in a bankruptcy? A Licensed Insolvency Trustee has up-to-date information on exemptions for every province and can advise you on how these apply to your situation. Your first consultation is free and confidential contact a Trustee today!
The provinces and territories generally define other exempt property as including some or all of the following categories, up to limited values that vary greatly from province to province:
- Food and heating fuel needed by you and your dependants
- Clothing needed by you and your dependants
- Household furnishings and appliances
- Pensions or retirement savings
- Miscellaneous categories in some provinces
The tools exemption and the farm exemption cannot both be taken; you may claim one category only, which applies to your principal occupation.
The Effects Of Bankruptcy On An Existing Mortgage
If you declare bankruptcy, there are established procedures of due process. You dont automatically lose your house. Nor is your loan accelerated to automatically become due if youve been current up to this point on your payments.
The following sections will go over how bankruptcy affects your current mortgage.
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Keeping The Car Outside Of Bankruptcy
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act eliminated drive through car loan agreements for bankruptcies. Before the act, consumers and car lenders could continue with whatever agreement they wanted, ignoring the bankruptcy. While drive-throughs are now against bankruptcy rules, it still happens and courts rarely enforce it. When no intention to reaffirm, redeem or surrender the car is filed by the deadline, a car loan is dropped from the bankruptcy. In many cases, the car owner and lender continue to do business and always, and courts rarely enforce it. Of course, this only works for the car owner if theyre making payments on time.
Since this option is counter to bankruptcy law, its not necessarily something youd want to pursue, and it provides a lot less protection than going with one of the routes allowed by law.
Downsides To Keeping Your House When Filing For Bankruptcy
You may desperately want to keep your house, even if youre so deep in debt youre considering filing bankruptcy. Thats understandable it not only has an emotional attachment, but could some day be an asset, even if youre behind on payments now.
That said, there are some financial downsides to hanging on to your house through a bankruptcy proceeding.
If you file for Chapter 13 bankruptcy, you have to continue making your monthly mortgage payments, as well as pay what you were behind on. This can be difficult, even if the payment plan that you, the court and your lenders agree to, seems to be doable.
Almost two-thirds of Chapter 13 bankruptcies fail. Its tough to keep to a payment plan over three to five years, even though modifications are allowed. Those involve going back to court and explaining why you need one. Through it all, you have to keep current on your mortgage payments, as well as all the other payments agreed to in the plan.
If you file for Chapter 7 and keep your house, you must make the monthly payments. The only hope for a modification, is the bank itself.
Bankruptcy, obviously, is complicated, and if youre worried about keeping your house, its even more so. If youre asking, Should I file for bankruptcy? your first move should be to talk to a credit counselor.
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Are You Behind On Your Car Payments
If you are behind on your car payments and at risk for repossession, filing for bankruptcy will generate an automatic stay, which will stop creditors from repossessing the vehicle.; At this point you can discuss with a qualified bankruptcy professional options to keep your car. These options include negotiating with the creditor to get car payments caught up, redeeming the vehicle or treating the vehicle in a Chapter 13 plan ;at a lower payment and interest rate.
Exchanging An Exempt Asset For Nonexempt Property
Most debtors in Chapter 7 bankruptcy don’t have enough money to buy back a nonexempt asset from the trustee. If you want to keep a specific nonexempt asset, you can offer to give the trustee one of your other exempt assets in exchange. In general, whether the trustee will agree to accept a different asset in exchange for your nonexempt property will depend on the value of the asset and the cost and labor associated with selling each type of property.
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With Both Chapter 7 And Chapter 13 You May Be Able To Keep Your Home
So, while Chapter 7 and Chapter 13 bankruptcy are different, both can allow you to keep your home. And, because credit card and other debts are eliminated, making mortgage payments after bankruptcy will be easier.
Be aware that exemption laws do not protect all property; a bankruptcy filing does not discharge all types of debts; and there are different classes of creditors that may be able to seize your property. The attorneys at Fesenmyer Cousino Weinzimmer understand each of these distinctions and can provide the best legal advice to protect your assets. Call us for help today.
I’m In Over My Head With Debt And I Just Lost My Job Should I File For Chapter 7 Bankruptcy
If you think you’ll incur significant debts soon, it might make sense to wait to file for Chapter 7 bankruptcy. Although your current debts will be discharged in your bankruptcy, debts incurred after you file for bankruptcy won’t be. Because you can’t file for bankruptcy for eight years after the filing date in a previous Chapter 7 discharge, you’ll be on the hook for those debts for a long time. To learn about other situations in which it makes sense to delay your bankruptcy filing, see Should I File Bankruptcy Now or Wait?
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If You Have A Car Loan
The equity is the amount you’d have left over if you sold the car and paid off the car For instance, if you sold the car for $10,000 and paid off the $5,000 loan balance, you’d have $5,000 left to put in your pocket. The amount you’d get to keep is your equity. On the other hand, if you owe as much as the car is worth, you’ll have “zero” equity. If the vehicle is worth less than you owe, you’ll have “negative” equity.
You Dont Lose Everything
The most important thing to realize is that you do not lose all your assets if you file bankruptcy in Canada. If you do have assets that must be surrendered to the trustee, you still have options like a consumer proposal to keep those assets.
To discuss your specific situation, contact us to talk to a Licensed Insolvency Trustee about how your assets may be treated in a bankruptcy and if a consumer proposal is a better way to preserve any assets you may wish to keep.
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Finding A Bankruptcy Lawyer
The best place to find a great bankruptcy lawyer is through the National Association of Bankruptcy attorneys or the National Association of Consumer Advocates . These not for profit organizations are comprised of attorneys who devote their life to helping consumers get a fresh financial start through bankruptcy.
There are other low cost or no cost alternatives available, but these places will treat your case as a commodity and you will not get a great result.
Best of luck to you in getting a great financial start!