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The absolute number one question I get when bankruptcy clients come in to discuss their situation with me is “can I keep my house and car in bankruptcy?” My answer is absolutely. You’re not going to lose your house or car. In a Chapter 7, you’re going to continue making those payments on house or a car. The bank is going to send us what’s called a reaffirmation agreement, and you’re going to sign those and continue to pay. Even if they don’t send you a bill, it’s important to continue to pay to keep those assets.

In a Chapter 13, you’re going to continue to make the house payment but the vehicle payment is going to be through the plan. They’re going to get their money, instead of directly by you, indirectly by the Chapter 13 Trustee.

As you can see, you do not lose your house or your car. Now there are exceptions because clients, believe or not, sometimes don’t want to keep a house or don’t want to keep a car. I had a client come in just the other day and they said, “I’ve got this vehicle, it’s very expensive and I don’t have a job. I’m going to go and do something different on the vehicle, get a cheaper one, pay cash for it. Can I stop making payments on the vehicle that I’ve got?” The answer is absolutely yes. You stop making the payments. The vehicle is voluntarily surrendered or repossessed. It’s going to be a repossession on your credit report, just so you know either situation you do. The vehicle is going to be sold at auction and the deficiency amount, which could be a judgment if you’re sued, is going to be wiped out by the Chapter 7 or the Chapter 13.

The same is for a house. If you don’t want to keep a house, if it’s a money pit, like that movie that Tom Hanks was in, you don’t have to keep that house. You can go and walk away. I want to tell you about something that I do. It is called bankruptcy or pre-bankruptcy planning. That is something that’s legitimate. It’s not fraud, it’s disclosed, it’s the whole nine yards, but it is a strategy like a chess game. I want to do that for every client that walks in the door.

I had this gentleman, he happened to be a psychologist, come in and he very much wanted to go and do something on his vehicle, keep it for work. He and his wife were going to get a divorce, complicated situation, but the bottom line is this. His credit score was good enough and his vehicle basically was upside down, so you have negative equity. In other words, you owe a lot more than what it’s worth and he had over 100,000 miles on that vehicle. What I had him do because he owed so much is not go and trade it in, simply go buy a new vehicle and then we filed the Chapter 7 bankruptcy. Therefore, he’s going to continue to make the payments on the new vehicle. The old vehicle goes, goodbye in the Chapter 7; he never has to deal with that again. He’s got a new vehicle and everybody is happy.

Many clients ask “Can I Keep My House and Car in Bankruptcy?” and have questions about what assets are protected when filing bankruptcy. Contact us today to arrange a free confidential consultation with experienced Jamestown bankruptcy lawyer Scott F. Humble. Let his 30+ years of experience work for you.

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