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Bankruptcy - Chapter 7 - Car, House & Personal Property

Bankruptcy:  Assets and Property - What can I kep?

Q: Will I lose all of my property if I file a Chapter 7 Bankruptcy?

A. NO. In many instances, the debtor may be able to keep most or all of his/her property. The law allows the debtor to keep all of his/her property to the extent of the "exempt" value claimed in the property. Only the debtor's "non-exempt" assets can be taken by the bankruptcy trustee, and so that the property can be sold to pay as much of the unsecured debt as is possible. However, from the proceeds of any sale, the trustee must pay off any indebtedness secured by the property, must pay the expenses of the sale, and must pay the debtor for the value of any claim of exemption in the property. Household furniture, clothing, most other common items of personal property, many cars, and most real property does not have sufficient equity or value to justify a sale by the trustee, and the trustee will not claim it.

Q: Can I keep my house?

•A. YES (but sometimes no). In many situations, you may be able to keep your residence. A Chapter 7 Bankruptcy case will normally stop a foreclosure proceedings, however, it will not always allow you to keep the residence or other real property. In keeping real property, there are several factors which must be considered:

i. Is there equity in the property? If the value of the real property is more than the balance due on the secured debt plus the amount that you can claim as "exempt", then the Trustee may want to sell the property for the benefit of unsecured creditors.

ii. How far behind in your mortgage payments are you? Lenders do not really want your house or real property, and, if you are not too far behind in your payments, they might work with you to temporarily lower payments, extend the time for repayment, etc.

iii. If you are too many months behind, then the lender is likely to want to foreclose on the property, or they may file a Motion for Relief from Stay in order to get the Court's permission to foreclose on the property. The filing of a Chapter 13 Bankruptcy instead of a Chapter 7 will be a better choice if you need to pay the past due amounts back to the lender over a period of time.

iv. Can you really make the monthly payments in the future? Unfortunately, the need to file a bankruptcy case is often the result of unemployment, reduction in wages, divorce, or some other factor that has lowered your monthly income. If even after the bankruptcy discharge of many of your debts, it will still be difficult for you to make your monthly mortgage payment(s).

Q: Can I keep my car?

A. YES (but sometimes no). In many situations, you may be able to keep your car. As discussed about keeping a house, there a number of factors to consider. (Note: See "Can I keep my house?" above.) If you want to keep your car, then these options exist:

i. Reaffirm the indebtedness: Car lenders will frequently agree for you to keep the vehicle if you will sign a Reaffirmation Agreement. This is a new promise to the indebtedness, and, if approved by the Court, again makes you personally liable for the payment of the balance due on the loan even after you receive a discharge of your debts in bankruptcy. BE VERY CAREFUL IN REAFFIRMING ANY DEBT. Be sure your income will be sufficient to make the payments...if you default in the payments, the lender will repossess the vehicle, sell it, and require you to pay any deficiency balance.

ii. Redeem the vehicle. In a Chapter 7 Bankruptcy you are allowed to pay the secured lender the current market value of a vehicle or other tangible personal property held for personal or family use, and then keep it even if you are "upside-down" (i.e. owe more to the lender than the vehicle is worth). You must pay the full amount of the current value to the lender at the time you redeem the vehicle. (Note: There are banks and other lenders that will lend you the money to pay the redemption value to the current lender and let you keep the property. The new loan interest rate will be high, however, if you are seriously upside-down but it is otherwise a good vehicle, it may make sense to make this new loan, and it may lower your monthly payments. Discuss this with your attorney.)

iii. Retain and pay. Technically this is not authorized by the Bankruptcy Code. However, most lenders do not want the vehicle back since they will usually lose money if they repossess it and sell it. While not required to do this, many lenders will simply accept the payments, and do nothing as long as the payments are made each month. If you want to keep the vehicle but are unsure if you can make the future payments, this may be worth the risk.

Q: What is meant by "exempt" property?

A. Exempt property can be viewed as being a amount of assets or items that a debtor is allowed to keep. Exempt property in bankruptcy is based on the traditional concept of a "homestead exemption" being a minimum items or property needed for an individual or family to exist and support itself. As allowed by the Bankruptcy Code, the State of Georgia has elected to use it own system of exemptions as the standard for exempt property in bankruptcy cases for Georgia residents. These are set forth in the Official Code of Georgia Annotated (O.C.G.A.) Section 44-12-100(a). Commonly used Georgia exemptions and exempt amounts include:

i. "Homestead" - Real or personal property used as residence to a value of $10,000 for an individual ($20,000 for a married couple); Up to $5,000 of unused portion of homestead may be applied to any other property of debtor and used as an additional "wildcard" exemption;

ii. Life Insurance Policy - Cash surrender value or accrued interest of Life Insurance Policy to a value of $2,000;

iii. Pensions/IRA's/401k's - Often stated as being unlimited in the amount that can be exempted, but there are some limits. Consult your attorney.

iv. Jewelry - Personal use jewelry to a value of not more than $500.00

v. Motor Vehicle - $3,500 in value of a car or other motor vehicle used for personal transportation;

vi. Personal Injury Recovery - Money recovered from a lawsuit for personal injuries suffered by the debtor to a value of $10,000.00;

vii. Tools of Trade - Implements, books, tools and other items used for production of income to a value of $1,500.00; and

viii. "Wildcard" Exemption - $600.00 in value in any property or properties as selected by the debtor.

NOTE: Exemptions are available only to individuals filing for bankruptcy, and cannot be used by corporate or other legal business entities.

Contacting the Right Attorney: Bankruptcy can be a complicated matter. The responses to these Frequently Asked Questions are general in nature, and are not intended to provide legal advice for specific cases. A consultation with a Georgia bankruptcy attorney can provide you with the information you need to determine which option best addresses your circumstances. As a solo practitioner, I am able to give more time and personalized attention to my clients. I will personally communicate with creditors or banks to resolve your issues. Your case will never be handed down to a legal assistant or other staff member.

NOTICE: The services or benefits offered are bankruptcy relief under the provisions of the U.S. Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Contacting the Right Attorney: Bankruptcy can be a complicated matter. The responses to these Frequently Asked Questions are general in nature, and are not intended to provide legal advice for specific cases. A consultation with a Georgia bankruptcy attorney can provide you with the information you need to determine which option best addresses your circumstances. As a solo practitioner, I am able to give more time and personalized attention to my clients. I will personally communicate with creditors or banks to resolve your issues. Your case will never be handed down to a legal assistant or other staff member.

NOTICE: The services or benefits offered are bankruptcy relief under the provisions of the U.S. Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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