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Can I Keep My House & Car If I File for Bankruptcy?

Kinnaird Law Firm Sept. 1, 2023

Stressed man due to poor financial conditionsWhen facing financial hardship in Colorado, filing for bankruptcy can help clear your debt responsibility and obtain a fresh financial start. However, there are various rules guiding how bankruptcy works, the available property exemptions, and how bankruptcy may affect your assets. For this reason, getting detailed guidance is imperative. The more you understand about the process, the better. 

At Kinnaird Law Firm, we're dedicated to offering experienced legal counsel and reliable advocacy to clients in bankruptcy-related matters. Our knowledgeable Colorado bankruptcy attorneys are available to discuss your unique situation and help you understand how bankruptcy will affect your home, motor vehicle, and other assets. We proudly serve clients across Colorado Springs, Douglas County, and El Paso County, Colorado. 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, or wage earner's bankruptcy, is designed to help regular income earners who are overwhelmed with debts repay their debts using their future earnings. In a Chapter 13 case, you will propose a reasonable repayment plan—spread over three to five years—to the creditor. The goal is to pay back your debts gradually using your disposable income through the repayment plan. 

Essentially, you can keep most or all of your assets and property in Chapter 13 while settling your debts—provided that you're consistent with the repayment plan. Once you file for Chapter 13, none of your assets will be sold by the trustee. Keep in mind that Chapter 13 bankruptcy is only available to regular income earners.   

Can You Keep Your House and Car With Chapter 13 Bankruptcy?

As mentioned earlier, Chapter 13 allows you to retain all or most of your property and assets in bankruptcy, including your vehicle and house. This requires paying the outstanding balance on the asset (vehicle or house) with your disposable income through the Chapter 13 repayment plan. In most cases, all your disposable income will be put into settling your debts. 

However, keeping your vehicle and home in Chapter 13 bankruptcy requires making monthly mortgage or car loan payments without any default. If you miss the monthly payments, the creditor can file a petition asking the bankruptcy court to lift the automatic stay order. If the court lifts the order, the lender will be able to take legal action to repossess or foreclose your property. 

It’s incredibly important to reach out to an attorney at any stage of this process. 

Chapter 7 Bankruptcy

Chapter 7 bankruptcy—or liquidation bankruptcy—is designed to help individuals and business owners going through financial distress to wipe out most of their general unsecured debts and achieve the needed financial clean slate. 

Furthermore, the court-appointed trustee will gather and sell your non-exempt assets, including your second home, second vehicle, vacation home, stocks, bonds, investments, bank accounts, and family heirlooms. Any amount generated from the sales will be used to repay your debts. 

In your Chapter 7 case, you will typically be allowed to keep your exempt assets, including your primary home, vehicle, furniture pieces, household appliances, clothing, retirement savings, personal injury compensation, and pensions. Additionally, your general unsecured debts, including personal loans, credit cards, and medical debts, will be discharged at the end of your case. 

Can You Keep Your House With Chapter 7 Bankruptcy?

If you file for Chapter 7 bankruptcy in Colorado, you can protect your home through the state's property exemptions. In Colorado, the homestead exemption allows you to protect up to $250,000 in the equity of your home. The amount increases to $350,000 for elderly (60 years or older) and disabled debtors. 

The homestead exemption, however, doesn't double when you file jointly with your spouse. If the homestead exemption can't protect the equity in your home, the trustee may collect and sell the house to repay your creditors. 

Can You Keep Your Car With Chapter 7 Bankruptcy? 

You can protect up to $7,500 of your motor vehicle's equity when you file for Chapter 7 in Colorado. This amount increases to $12,500 for elderly or disabled persons. However, if you used the car as collateral to secure a loan, the creditor may be able to repossess your vehicle by asking the bankruptcy court to lift the automatic stay order. 

Results-Driven Legal Advocacy

We understand how emotionally overwhelming this time can be for you and your loved ones. Understanding your available bankruptcy options and the rules pertaining to property exemptions is crucial in order to make informed, clear-headed decisions about your bankruptcy case. At Kinnaird Law Firm, our attorneys are ready to guide consumers through the complexities of bankruptcy. As your legal counsel, we can educate you about the available exemptions, help calculate the equity on your property, and outline a strategic plan to protect your home, vehicle, and other assets in bankruptcy. 

Contact us at Kinnaird Law Firm today to schedule an initial consultation. Our attorneys are proud to serve clients across Colorado Springs, Douglas County, and El Paso County, Colorado.