Whether it’s a house, or a car, or a computer, clients want to know if filing bankruptcy will strip them of their “stuff” bought on time.
Frequently the answer is that they can keep the asset as far as the bankruptcy system is concerned.
Bankruptcy trustees are only interested in assets that have substantial equity in today’s market and haven’t been claimed exempt. Often, when you subtract from the value of the asset the outstanding debt and the claimed exemption, there’s nothing left for the trustee.
So you can, but is it smart?
Whether they should keep the property is another question that I want to raise.
Voluntary liens ride through the bankruptcy case. Your personal liability for the debt is erased, but the creditor’s lien on your property continues, unless the bankruptcy court has made an order stripping the lien.
I would expand the analysis: if the choice is to pay $900/month to keep the current car on which you owe more than it’s now worth, what is point in keeping it? Why continue struggling with an outsized payment when you aren’t protecting equity in the asset?
Continuing payment on secured debts is probably sucking money out of your budget that could fund some emergency savings and a retirement account.
Get full benefit of fresh start
I wish for my clients a truly fresh start with living expenses they can afford. Paying more than something is worth clouds that fresh start.
It’s tough to surrender your purchases, but having filed bankruptcy should bring more clarity to your thinking about money and where it goes.
Paying more than the house or the car is worth may not be the wisest choice.
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