An often asked question is, "What will happen to my house if I file bankruptcyi?" Depending upon which exemption scheme is selected and your circumstances, you may exempt up to $100,000 in equityi. When calculating your equity you should with a forced liquidation price as opposed to the ideal selling condition price to arrive at a value for your home. Once you know that value, subtract the amount owed and any selling and transfer costs to determine the equity. In a depressed market, liquidated properties are often valued much less than what we would like to think the property is worth.
Depending upon which exemption scheme is selected, you may keep your car if your equity is equal to or less than the allowed exemption. Generally speaking, depending upon the exemption scheme selected, you may exempt as little as $1200 or as much as $9100. When calculating your equity you should use the Kelly Blue Book or a comparable guide. Once you know the value, then subtract the amount owed from the value to calculate the equity.
Generally, most courts understand that you need a car to work to get back on your feet. Apply rules of common sense here: If you own vintage cars which are free and clear and worth thousands of dollars, you are probably not going to be able to keep them. If, on the other hand, you have a car worth $10,000 and you owe $8000 on it, you will most likely keep it. Again, the need to talk to a good lawyer should be evident. Most leased vehicles have no equity and therefore are entirely exempt. If you owe money on your car or it is leased you must still make the payments. In those instances you will have to redeem or reaffirm the property to keep it. However, in some circumstance your representative can re-negotiate the loan or the leasei to get a more favorable deal for you.
If your home and vehicle have too much equity (many homes in coastal cities, for example) you may not be able to avoid losing them in the bankruptcy proceedings. In cases such as these, it would be wise to look into other options, such as debt consolidation or consumer crediti counseling, first. Then go back to the bankruptcy option if the other options aren't right for your situation.
