Tue, 09 Dec 2025 23:32:57 -0600WeeblyThu, 31 Jul 2014 19:42:33 GMThttp://www.memphisfreshstart.com/blog/will-i-lose-my-home-or-car-if-i-file-bankruptcyThe short answer is no, you will not lose your car or your home due to a bankruptcy filing, assuming you want to keep the home or car (and the underlying debt).  However there are plenty of variables as to how we go about accomplishing this goal.  One of the following examples will likely be similar to your situation, but is not legal advice as all situations are different.  If not, give me a call and we can discuss your specific case.

Your Car in Memphis and Shelby County Bankruptcy

o   Chapter 7 – More Money Owed on Car than it’s worth

§  In this situation, you will not lose your car (although you may want to consider surrendering the car and wiping out the debt you owe).  Because you owe more than the market value of the vehicle, it is not an “asset” as far as your bankruptcy is concerned.  You will sign what is called a “Reaffirmation Agreement”, and your car payments will likely stay exactly the same as they were before you filed.

o   Chapter 7 – No Money is Owed on your Car (Or Very Little is Owed)

§  Your ability to keep your vehicle in this situation will depend on the fair market value of the vehicle currently.  The mileage, condition, vehicle history, etc. will all play into determining how much your car is worth.  As it pertains to bankruptcy in Memphis and Shelby County, you will be entitled to a $10,000 exemption of your personal property.  This means the court can’t touch it.  Most often, your vehicle will be covered under this exemption.  In the event that it’s not, there are alternatives to keeping the car.

o   Chapter 13 – More Money Owed on Car than it’s worth

§  In all likelihood, you will be able to lower your monthly car payments in a Chapter 13 repayment plan, as well as the interest rate on the vehicle.  Depending on how recently your car was financed, you may have to pay only the fair market value of the vehicle (as opposed to the contract price).

o   Chapter 13 – No Money is Owed on your Car (Or Very Little is Owed)

§  Even if your car is a valuable asset in a Chapter 13, the bankruptcy court does not want to take your property.  The same exemptions will apply as above in Chapter 7, however the value of your vehicle can play a role in the amount you repay to other creditors in your plan.

Your Home in Memphis and Shelby County Bankruptcy

o   Chapter 7 – More Money Owed on Home than it’s worth

§  As long as you are current on your mortgage payments, in most cases you will simply keep paying your mortgage as you did prior to filing bankruptcy.  Again, in this situation the home is not considered an asset, and you have the option to walk away from the mortgage payments by surrendering the house.

o   Chapter 7 – No Money is Owed on your Home (or very little is owed)

§  If this is your scenario, we will likely not file a Chapter 7 (or bankruptcy at all).  However you can still file a Chapter 13, prepare a repayment plan for your debts, and keep your home (see below).

o   Chapter 13 – More Money Owed on Home than it’s worth

§  While you do not have the option to lower the monthly payments on the home mortgage as you do with a car, you will still keep your home.  As long as you’re current on the payments, you will most likely continue to make the payments outside of the Chapter 13 bankruptcy plan, at least in Memphis and Shelby County.  Chapter 13 does offer unique alternatives though that Chapter 7 does not.

·         Chapter 13 will allow you to stop a foreclosure by preparing a plan that will catch up on past due payments over time.

·         Chapter 13 will allow you to “strip” a 2nd mortgage if there is more money owed on the first mortgage than your house is worth.

o   Chapter 13 – No Money is Owed on your Home (or very little is owed)

§  You will keep your home, however you will likely have to repay the majority of your debts in your Chapter 13 plan.  Again, this depends on many factors, but in general you will have to repay the unexempt value of your home, or all of your debt, whichever is less.  There are still many benefits to this type of reorganization, including interest free payments on most unsecured debts.

As always, the information and examples in this article are both general and hypothetical.  Your scenario has nuances that make it different and this should NOT be construed as legal advice.  In the event you would like legal advice, call my office to set up a free bankruptcy consultation.

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