Can I Keep My Home and Car in Bankruptcy?
Most people are able to keep their home and automobiles when they file bankruptcy, provided that they have sufficient income to pay their mortgage and vehicle loans. In a Chapter 7 you have three choices for how to deal with mortgage and vehicle loan debt: 1) You can keep your home and/or automobile and reaffirm the loan, which means you continue making your loan payments under the original payment terms. In order to reaffirm, your payments usually have to be current. 2) You can surrender your home and/or car in exchange for having the loan discharged. 3) You can keep your home and/or vehicle by "redeeming" it, which is rarely done because it involves making one lump sum payment to the lender.
In Chapter 13, if your mortgage payments are current, you can keep your home and continue making your mortgage payments directly to your lender "outside of the plan."If your mortgage payments are in default, you can still keep your home by putting the late mortgage payments in your three to five year Chapter 13 plan while simultaneously paying your post-Chapter 13 filing date mortgage payments directly to your lender outside of the plan. The ability to do this is one of the main reasons some people file a Chapter 13. If you cannot afford to pay your mortgage, you can surrender your home in exchange for having the loan discharged. In Wisconsin, both the Eastern and Western District Bankruptcy Courts also have a special Mortgage Modification Mediation program for Chapter 13 homeowners.
For auto loans in Chapter 13, regardless of whether your payments are current or not, if you want to keep your vehicle, you must discontinue making payments directly to your lender. Instead, you must put the entire balance of your auto loan on the date that your Chapter 13 is filed into your three to five year Chapter 13 plan. Under some circumstances, you may be able to pay less than the full balance of your auto loan. This is called a "cram-down." If you cannot afford to pay your auto loan, you can surrender your vehicle in exchange for having the loan discharged.
The above explanation assumes that your home and/or auto is exempt. Your bankruptcy attorney will help you determine this. At Ash Street Law, it is rare that we encounter a client whose home or auto is not exempt, but it does happen.