When you face repossession of your home or your car, you may need to declare bankruptcy to save them. If creditors have a valid lien or mortgage on either your vehicle or you real estate filing bankruptcy will temporarily stop any repossession process. If you have already had your car or home repossessed (foreclosed on, in the case of your house) you may still be able to get either or both back if you act right away.
If you file a chapter 13 bankruptcy you should be able to keep your home and your car. If you file a chapter 7 bankruptcy you will keep both for awhile but you might ultimately be faced with repossession for liquidation.
Depending on which U.S. state you live in, and what the state laws say about the matter, the trustee of that bankruptcy may be charged with liquidating both your car and home to pay your debts.
Declaring bankruptcy, while it can halt or at least slow down the repossession process should not be looked at as the preferable cure for your financial problems.
While it is one course of action - and if it gets to the point of repossession drastic action would be required to save your home and vehicle - its always best to try to salvage the situation through debt consolidation, loans or negotiation with your creditors.
Bankruptcy will give you somewhat of a fresh financial start but it can have consequences almost as grave as repossession.
The fact that you had a bankruptcy will be on your credit record for ten years, and that is a matter of public record, unlike your other credit history. If you should run into similar financial crises and subsequently repossession possibilities you wont be able to again declare bankruptcy for another eight year.
There are two types of bankruptcy, as we mentioned before, that will help you keep your home safe from foreclosure and your vehicle from repossession. A Chapter 7 bankruptcy is a short term band aid whose help depends on your homes equity and that states laws on homesteading and personal bankruptcy.
If you file for a Chapter 13 bankruptcy, however, not only will it stop that repossession and foreclosure but it will more than likely save you from losing your home at all. With a Chapter 13 bankruptcy you will make arrangements to pay some of your debt and generally all of your debt on any secured loans.
Chapter 13 is sometimes called a wage earner bankruptcy because it lets debtors who have their own consistent income create a financial plan to repay at least a portion of their debts.
With a typical Chapter 13 the debtor ask the creditors to accept installment payment for three to pay years. During this time frame these creditors are legally restricted from continuing collection efforts or starting any new ones.
The debtors level of income and the type of bankruptcy determine the time allowed for repayment. The primary benefit to choosing a Chapter 13 over a Chapter 7 is to save a home and car from repossession. This is in sharp contrast to a Chapter 7 bankruptcy in which a trustee takes repossession of all or most of the debtors property and liquidates it to settle debts.
Once the possessions are sold and the money paid to creditors, all debts are erased whether there was enough money to pay them off or not. There are some exceptions, of course. Bankruptcy will not protect a U.S. citizen from the IRS.
James Copper is a reposession specialist and has spent many years helping people to stop repossession.
