Even though a Chapter 7 bankruptcy is a “no-asset” case, debtors are still allowed to keep limited “exempt” personal property. A major concern of debtors is that they would lose their car if they filed for Chapter 7 bankruptcy. This should not be the case for most debtors unless they are defaulting on their car loan and listing the account as an unsecured debt on their bankruptcy petition. Debtors who own their home and are using the Massachusetts homestead exemption qualify to have a $700 car, but even if a debtor owns several thousand dollars worth in a motor vehicle, it is unlikely to be seized as used cars would likely not fetch enough for it to be worth the trustee’s while. Federal law for non-homeowners allows a $3,450 car, with additional amounts also available using the wildcard exemption.
Life insurance policies are considered exempt if they are term policies, usually the type offered by employers, with only a death benefit available to beneficiaries and no cash-out value during the debtor’s lifetime. Whole policies are not exempt, but policies worth relatively small amounts may be covered by the wildcard exemption. Most retirement savings accounts would qualify for an unlimited amount of exemption under both state and federal law and the monies from these accounts would likely only be seized as preferential transfers if the debtor had taken large distributions out before filing bankruptcy while avoiding paying creditors.
November 28th, 2010 by Administrator
The short answer is – Yes, as long as you are current on your mortgage and are able to keep up with the payments. If the homeowner can afford the mortgage terms but cannot afford to pay off other debts, such as credit cards or medical bills you may be able to keep your house under a Chapter 7 case by filing a Declaration of Homestead which protects the interest in the house you live in up to $500,000 in Massachusetts. What this means is, as long as your home value is below $500,000 & payments current you can keep your home and still file bankruptcy to deal with other debts.
There are several scenarios and conditions that we should consider.
These days there are many who try a last ditch effort to stop a foreclosure by filing bankruptcy. Even if an emergency bankruptcy petition is filed, this only buys you more time before the bank gets around the automatic stay protection of bankruptcy to foreclose on the house unless you are able to refinance your mortgage, able to work things out with the bank and somehow come up with the balance owed. This would be your ideal, best case scenario and everything works out for all parties involved. Unfortunately, this is not as easy as it sounds. You can see my post here about how the foreclosure process works.
If the house does go to foreclosure, then a Chapter 7 bankruptcy discharge will protect the homeowner from having to pay the mortgage deficiency. This is why it is very important to take a look at your credit report as the bank may not immediately go after you for this balance, but wait until your financial situation is more secure and then try to collect the money owed. This scenario is possible if your house went to foreclosure or you had a short sale.
Like always, this does not constitute legal advice. It is just general information. If you think you need help, please contact a bankruptcy attorney in your area to address your specific situation.
August 2nd, 2010 by Administrator
