You Don’t Need to Give Up Your Home or Car When You File Bankruptcy in South Jersey

Did you know that you don't have to give up your home or your car when you file a bankruptcy case in South Jersey?

Many South Jersey residents who file a bankruptcy case do just the opposite, keeping either their home, their car, or both when their case is filed. This can be done while at the same time discharging other unsecured debts that are not secured on their home or car. To keep either the home or car or both, of course you just need to keep making your mortgage payment, car loan, or car lease payment.

How Chapter 7 Can Help

To keep your home or car even while you discharge other debts in a simple Chapter 7 bankruptcy case filed in South Jersey, simply keep making payments on your mortgage and car. If you are current on your home and car, or substantially current and can catch up within a short time after filing your Chapter 7 case, then you simply maintain current payments on these secured obligations.

In many cases a married couple files a Chapter 7, electing to keep the house and then choosing to keep one car and surrender another where the payment is too high or the car's value is well below what is owed. Where you are surrendering either a car or a home, the bankruptcy discharge wipes out your personal liability on that secured loan.

For example, you owe $20,000 on a 2005 Ford Beater sedan that has high miles and is worth only $3,000. Upon your surrender of that vehicle, the lender will wholesale the vehicle and perhaps get $1,500 to apply to your loan balance, but your entire remaining $18,500 balance will be discharged in your Chapter 7 case.

How Chapter 13 Can Help

There may be reasons why you choose to file a monthly repayment plan under Chapter 13 bankruptcy in South Jersey. To keep your home or car even while you discharge unsecured debts in a Chapter 13, simply keep making current payments on your mortgage and car.

However, if you are behind on either of these secured debts, the Chapter 13 has the advantage of allowing you to include all your mortgage and vehicle arrears in your repayment plan. You are allowed to spread these secured arrears out over up to 60 months in your plan. This allows you to stop or prevent a foreclosure or a repossession.

In many cases a married couple files a Chapter 13, electing to keep the mortgage and then choosing to keep one car and surrender another where the payment is too high or the car's value is well below what is owed. Where you are surrendering either a car or a home, the bankruptcy discharge almost always wipes out your personal liability on that secured loan unless you have unusual circumstances like way too much income or tons of equity in real estate.

For example, your South Jersey Chapter 13 plan includes mortgage arrears to catch up your mortgage. You also decide to keep Car A, on which you are current, and surrender Car B, on which you are 4 months behind. In this example you state in your plan that you are surrendering Car B and thus you do not have to include any arrears on Car B in your plan.

Upon your surrender of Car B, the lender will wholesale the vehicle, deduct sale proceeds from your loan balance, and then file a proof of claim with the court that lists your unsecured balance on that loan. If your plan is one where unsecured creditors are to get zero, then of course that car deficiency creditor will get zero as well. In this example all of your unsecured debts will be discharged after you successfully complete all of your plan payment obligations.