What Property Can I Keep?

In a chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors.  While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.

In determining whether property is exempt, you must keep a few things in mind.  The value of property is not the amount you paid for it, but what it is worth now.  Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

You also only need to look at your equity in property.  This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens.  For example, if you own a $400,000 house with a $350,000 mortgage, you count your exemptions against the $50,000 which is your equity if you sell it.

If the property is secured by a loan, such as a car or home, and you are current on the payments, the equity is covered by your exemptions, and you elect to keep making payments on the loan you generally can keep this property through the bankruptcy.  If all the equity is not covered by your exemptions the Trustee may elect to liquidate this asset and distribute the assets.  Generally, in this case, you would be entitled to the value of your exemption in the asset as a cash payment.