The decision to file bankruptcy is an important one, and you should not take it lightly.
If you are drowning in debt and having trouble keeping up with your bills, you may feel as though the situation is hopeless. You might be under quite a bit of financial stress and may wonder whether bankruptcy is the best option. Every case is different, so it is helpful to learn as much as you can about bankruptcy with help from a bankruptcy attorney. Some people are curious as to whether they will lose their possessions, such as their car, when they file bankruptcy.
Types of Personal Bankruptcy
Before you decide to take a major step in your life such as filing bankruptcy, you will want to know about the types of bankruptcy available. There are two main types of personal bankruptcy:
- Chapter 7
- Chapter 13
Both types of bankruptcy will give you a fresh start so you can begin to rebuild your credit over time. Most people will begin to see an improvement in their credit scores within two years of filing bankruptcy, even though the bankruptcy will remain on your credit record for up to 10 years. Chapter 7 is also called liquidation bankruptcy because you will need to sell some of your assets to repay your debts. Chapter 11 is reorganization of your debts with a plan for repayment through regular monthly installments.
Will I Need to Sell My Car or Other Possessions?
Your vehicle is one of your most important assets and you need it to get to work and around town. You may be worried that if you file bankruptcy, you must sell your car and fear that you will be left without transportation. The good news is that generally, you will be able to keep your vehicle when you file bankruptcy. When you file Chapter 7 bankruptcy the trustee will be able to sell your property in order to repay your debts. There are some exceptions governed by U.S. federal and state bankruptcy laws.
The motor vehicle exemption allows up to $4,000 in equity in a vehicle. In addition, the law allows for personal property or consumer goods exemptions up to $12,000. The household consumer goods exemption is meant to cover things such as furniture, appliances, jewelry, keepsakes, and any other items that you wish to keep. You may be allowed to apportion some of the personal property exemption towards your vehicle. If you still have a loan for the vehicle, you may be able to continue to make payments so you can keep it. The law also allows a homestead exemption of $75,000 or $150,000 if filing jointly.
Bankruptcy is an option that has both pros and cons. The decision to file bankruptcy is yours alone. You can get the legal guidance you need from a reputable bankruptcy attorney.