Will I Lose Everything if I File for Bankruptcy?
Your beliefs about bankruptcy might include thoughts of the government selling everything the debtor owns, leaving them destitute. This is simply not true. Most people are able to keep many of their possessions after bankruptcy, giving them a chance to get finances under control, stop creditor harassment, and get a fresh financial start.
Whether you will surrender any of your possessions during bankruptcy depends on many factors. Every situation is different. Federal law establishes the overarching set of rules that determine which assets are protected (exempt) during bankruptcy, but it also permits each state to set its own rules. While state law can vary slightly, each state has exemptions to protect certain types of assets in certain cases.
In a Virginia Chapter 7 (liquidation) case, you can usually keep your property that the law lists as exempt from creditors. In many cases, the exemptions are enough that you won’t lose your home or car. However, in a Chapter 7 case, you must be current on any debt related to your car or home to keep that asset. If you are not current and you wish to keep your car or home, you will want to consider a Chapter 13 filing.
In the situation where you are behind on payments for a secured debt and wish to keep it or where you have more property than can be protected by the applicable exemptions, you can file a Chapter 13 (reorganization) bankruptcy to protect your property. In a Chapter 13 proceeding, you work with your bankruptcy attorney and the court to try to reduce your debt to an amount you can manage over time. Sometimes mortgage payments and auto payments can also be reduced. As long as you follow the established repayment plan and make all required payments against your outstanding debt, you run little risk of losing your house or other valued assets.
So don’t let a fear of losing everything keep you from getting trusted advice from a bankruptcy attorney. With careful planning, you can avoid losing many of your prized possessions.