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With so many people filing bankruptcy these days there are many misconceptions that are floating around out there. People think that if they file bankruptcy they have to surrender their home and all of their property. This is far from the truth. There are liberal exemption amounts that are allowed when filing bankruptcy depending on what state the individual lives in. Again, filing for bankruptcy does not necessarily predetermine what happens to your home. Nowadays, many Americans are living in a home that they owed more on than it is worth. Some of them refinanced with one of those crazy loans when real estate prices went up, and many lenders were giving 125% of the appraised value. While others just bought in during the peak of the market. Needless to say, both of these individuals are obviously buried upside down in their home. Because the house is worth less than what the debtor owes, as long as the debtor continues to make the payments they can keep the house if they choose. In these tough times the last thing a bank wants is another house back.

When an individual decides that they need to file bankruptcy, they don't need to decide at that time whether or not to keep their home or other property. This is one of the nice things about a bankruptcy filing, the debtor has all the way up to a few weeks before the discharge to change their mind if they decide to let something go in bankruptcy.

The basic idea of Chapter 7 bankruptcy is for the trustee to find nonexempt assets of value that can be turned into cash and split amongst the creditors. In a Chapter 13 bankruptcy, the amount of nonexempt property that a debtor is trying to keep is determined by the Chapter 13 payment plan. Basically, if it's nonexempt the debtor can keep the asset as long as they buy it back from the creditors in the payment plan.

The bankruptcy trustee is not interested in attempting to sell a house that has no nonexempt equity. With today's real estate market the trustee also has to take into consideration the time and cost of trying to sell a piece of property. They might put a house on the market and end up having to reduce the price and not receive anything except wasting their time. The bankruptcy trustee is only interested in something that can be easily liquidated and will produce enough value for the creditors.

When filing bankruptcy a person has a few options if they own their home. First of all, they can just keep the house as long as they can stay current on their payments and nothing changes. Next, the debtor can surrender the house and try to stay there as long as they can until the bank gets a foreclosure on the property. If the property has a deficiency when it's foreclosed on, many times lenders will file a 1099C with the IRS, making the loss, taxable income for the debtor. That's why it's important to be honest with yourself and if you think you can't afford the payments, this would be the time to surrender the home so you could discharge any deficiency in the bankruptcy. Another option is, get a load mod on the property so it's more affordable. Lately, it's been reported that only about 5% of these even go through, so this might be a waste of time. The last thing a debtor can do is try and sell the property. This again, depends on the amount of equity and the market where the property exists.

This gives a debtor of few options when filing bankruptcy. When deciding what's best for your financial future the first stop should be consulting with a bankruptcy attorney to see what is feasible for your personal situation. When you own property this is the time that the decision should be made to keep it or let it go. Try to look into your crystal ball and make sure it will be affordable, if not let it go, you can always buy another house.

The author started FilingBankruptcyNow.Com which is a website that helps individuals with debt problems by putting them in touch with a local bankruptcy attorney that specializes in filing bankruptcy under Chapter 7 and Chapter 13 bankruptcy. Check our website for more answers to bankruptcy questions and ideas on how to have a debt free future.

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When filing for bankruptcy protection there are exemptions that protect the stuff you own. In most bankruptcy cases, whether filing a Chapter 7 or Chapter 13 bankruptcy, you will be able to keep your cars. If you have a loan on the vehicle you can keep making the payments just like you did before filing for bankruptcy and keep the car. Below details the different circumstances in a Chapter 7 or Chapter 13 filed in California that allows you to keep your car if it is paid in full, if you have a car loan and how bankruptcy can help.

Chapter 7/13 Bankruptcy and Your Car is Paid in Full

In most bankruptcy cases you will be able to keep a paid in full car. California has two sets of exemptions to choose from when filing for bankruptcy protection. California Civil Procedure 703 exemptions include an exemption of $3,525 to protect a car plus the wildcard exemption totaling $23,250. So if you have one or more cars and the combined value of the vehicles does not exceed $26,775, they can be protected. Keep in mind that the wildcard exemption is also used to protect other assets such as the money in your bank accounts and other valuable assets like expensive jewelry, so the full wildcard exemption of $23,250 will most likely not be available to protect other assets like a car. California Civil Procedure 704 exemptions include a vehicle exemption totaling $2,750. California Civil Procedure 704 exemptions provide generous homestead exemptions to protect equity in houses and the exemptions to protect other assets are more limited.

Chapter 7 Bankruptcy and Cars With Loans

If you have a vehicle loan and you choose to file a Chapter 7 case, there are three options to deal with the car loan. If you want to keep the car and can afford to make the car payment each month you can continue to make your normal monthly payment and keep the car. The car loan company will most like want you to agree to continue to pay them after the bankruptcy is filed by signing a reaffirmation agreement.

If you cannot afford the car loan and want to get rid of the car then you may surrender the car or give it back to the loan company. If you surrender the car to the loan company any debt resulting from the surrender of the car is discharged in the bankruptcy case. Once the bankruptcy case is filed and you intend to surrender the car, arrangements need to be made to give the car back.

The last option is to redeem the vehicle for its fair market value. This option is complicated and must have Court approval. When redeeming a vehicle for its fair market value the original car loan company must be paid in full what the car is worth, not what is owed on the loan at the time the bankruptcy case is filed. In most cases coming up with a lump sum payment is not an option.

Chapter 13 and Cars With Loans

In 2005 Congress reformed the Bankruptcy Code and changed the laws regarding car loans and their treatment when filing a Chapter 13 Bankruptcy. When you buy a car the value of the car usually decreases faster than you are paying for the car. So after some time has passed your car is worth less than what you owe on the car. In a Chapter 13 bankruptcy you can cram down the amount you owe on the car to the fair market value if the car was purchased 910 days before the bankruptcy case was filed, which is about two and a half years. Let's say you owe $15,000 on your car loan and the car is only worth $8,000 at the time you filed the Chapter 13 bankruptcy case and purchased the car three years ago. You will be able now pay $8,000 for the car in the Chapter 13 plan over three or six years depending upon the circumstances. You still must pay interest on the $8,000 you will now be paying in the Chapter 13 plan. This is a very powerful way to save money especially if you paid too much for the vehicle or have a car loan with a high interest rate. The car loan company can also object to the value of the car in the Chapter 13 plan. Ultimately the Bankruptcy Judge assigned to your case will decide what the value of the car is if there is a difference of opinion as to the cars value.

West Coast Bankruptcy Attorneys is a bay area and California consumer bankruptcy firm filing Chapter 7 and Chapter 13 for individuals in need. Visit West Coast Bankruptcy Attorneys online to find an San Mateo Bankruptcy Attorney or a San Jose Bankruptcy Lawyer committed to providing the best experience for a reasonable fee.

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Let's face it - the economy is unstable. If you're one of the lucky few people that are 100% certain that your job is secure, then you are in the minority. Most people don't know if they will still have a job a month from now. Therefore, it's not surprising that even if you file a Chapter 13 bankruptcy case, that doesn't mean your income will be the same throughout the term of your plan. The basic concept behind the Chapter 13 "Wage Earner" bankruptcy plan is that, taking into account the income that you earn, minus all the allowable deductions, you have some money left over at the end of the month to pay your creditors.

To be considered a good faith filing you need to make sure that all your disposable income is being paid into the Chapter 13 plan. That may be easy to do in the beginning of your Chapter 13 bankruptcy term, but what happens when you receive a pay cut, or worse, lose your job? Your expenses don't decrease just because your income does. Most expenses, like utilities, food and car insurance remain constant. If there is a loss of income, you may not have sufficient funds each month for your Chapter 13 plan payment. Therefore, what are some of the options that are available for you?

Converting Your Chapter 13 Bankruptcy into a Chapter 7 Bankruptcy Case

One of the first things to be determined is whether you would otherwise qualify for a Chapter 7 based on your current circumstances. If you do qualify for a Chapter 7, then you can file a motion with the court to convert your case to a Chapter 7, and have your case be treated like it was a Chapter 7. This means that you would receive a discharge of all your allowable unsecured debt within three to four months after the conversion to a Chapter 7, and then your case will be closed.

This option is good if you have no arrears for secured debt that you were paying through the Chapter 13 plan. If there were arrears (for example, if you owed money to your first mortgage lender), then those arrears would need to be paid off. If you cannot afford to pay back the remainder of the arrears, your collateral may be repossessed or foreclosed.

Essentially, all benefits that you enjoy in a Chapter 13 would no longer be applicable if your case is converted to Chapter 7, such as the lien stripping of a junior mortgage. Even if the judge granted the motion to strip your junior mortgage, the lien is not taken off your property unless there is a successful completion of your Chapter 13 plan. Converting your Chapter 13 case into a Chapter 7 case means that your Chapter 13 plan was not successfully completed, and therefore, no lien stripping.

Modifying Your Chapter 13 Plan

If you cannot qualify for a Chapter 7 or it is not in your best financial interest to convert to Chapter 7, the next option is to try to modify your Chapter 13 plan payments to a lower amount. The judge may allow you to modify your Chapter 13 plan if you can show that there are changed circumstances which make it hard for you to continue making your plan payments. The amount lowered depends on your specific case. In some cases the Chapter 13 plan payments are already the lowest possible, and therefore a lower payment will not be feasible in the case. If that were to occur, then the other possible option is to have your Chapter 13 case be dismissed.

Dismissal of Your Chapter 13 Case

Your Chapter 13 bankruptcy case may be dismissed either voluntarily or involuntarily (by the request of the trustee or creditors) due to non-payment. If your case is dismissed, then your debts are not discharged, and you are back in the same position as before you filed your bankruptcy case. Any amounts that were paid to creditors through the Chapter 13 plan will be credited towards your accounts with these creditors, but you will still owe the remaining balance. If you were behind on your mortgage or car payments at the time the Chapter 13 case was filed, then your house may be foreclosed on and your car can be repossessed after dismissal and loss the protection from the bankruptcy court.

West Coast Bankruptcy Attorneys is a Bay Area law firm filing Chapter 7 and Chapter 13 cases for individuals in need. Visit West Coast Bankruptcy Attorneys online to find Chapter 13 bankruptcy lawyers in Fremont or Redwood City bankruptcy lawyers committed to providing the best bankruptcy experience for a reasonable fee.

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