Hamilton & Antonsen
Protecting your assets during bankruptcy
Keeping My Home and Car During Bankruptcy
One of the most common questions that people ask when they are debating filing for bankruptcy is whether they will be able to keep their home and vehicle. For many people, these are the most valuable assets that they own, and they want to avoid losing them if at all possible.
To provide you with a better idea of how bankruptcy impacts ownership of these assets, this page reviews details about how Chapter 7 and Chapter 13 can influence the ownership of a person’s home and car.
Keeping Your Home After Chapter 7 Bankruptcy
People who file for Chapter 7 bankruptcy in Illinois are often able to retain ownership of their house subject to two conditions. First, a person must be current with mortgage payments at the time of filing for bankruptcy or be able to get current in a timely manner. Second, a single person in Illinois is only able to exempt up to $15,000 in equity in a home. If they have more than $15,000 in equity their home can be at risk of surrender to the bankruptcy estate.
By granting a person relief from other types of debts, bankruptcy often frees up money so a person can continue paying his or her mortgage.
Retaining Ownership of an Illinois House Following Chapter 13 Bankruptcy
If a person is behind on mortgage payments in Will County, Illinois but wants to retain ownership of a home, Chapter 13 bankruptcy can sometimes provide the needed opportunity to catch up on this debt.
Under Chapter 13 bankruptcy, courts approve a plan for a person to repay past due mortgage amounts under the terms of a three to a five-year repayment plan. Provided a person keeps up with these payments, a lender cannot foreclose on the home if the bankrutpcy plan was approved by the court.
Vehicles and Chapter 7 Bankruptcy
Just like with houses, a person retains ownership of a vehicle in Chapter 7 bankruptcy provided that individual remains current with loan payments or the vehicle is paid off. Also, Illinois state law allows a person to exempt only up to $2,400 in equity in one motor vehicle.
Many vehicle lenders permit individuals to continue making payments on auto loans after a person files for bankruptcy, but these lenders have the right repossess a vehicle unless a person “reaffirms” a debt by agreeing to the terms of a new contract and later failing to follow this agreement. Reaffirming is promising to pay the debt per the original terms of the loan. The debt will then outlast the bankruptcy and not be discharged.
Vehicles and Chapter 13 Bankruptcy
If a person is behind on a vehicle loan, it is possible to utilize Chapter 13 bankruptcy to catch up on long-overdue payments. In contrast to house loans, however, Chapter 13 bankruptcy provides several additional options for vehicles.
In Chapter 13 bankruptcy, a person can stretch out past due vehicle payments over the course of the bankrutpcy plan. Additionally, if a vehicle loan is old enough, individuals can sometimes lower a balance on the remaining principal and the applicable interest rate.
Speak with a Knowledgeable Joliet Bankruptcy Attorney Today
Even though the bankruptcy process is complex, it is still possible to sometimes retain ownership of houses and vehicles during the Chapter 7 and Chapter 13 bankruptcy processes. If you need the assistance of a knowledgeable lawyer, do not hesitate to call Hamilton & Antonsen Ltd. at 815.729.9220 or contact us to schedule a free case evaluation.