When considering bankruptcy many people are afraid they will lose their home or their cars. Some fear that they will lose their jobs, others fear that their credit will be so bad that they will not be able to get financing for a new car or home. In most cases these fears may be alleviated after speaking to an experienced bankruptcy attorney.
Can I keep my car if I file for bankruptcy? In most cases the answer is “yes, if you want to.” In Colorado a debtor under the age of 60 is entitled to a $5000 exemption on the equity in their vehicle. A debtor over 60 or with a disability is entitled to a $10,000 exemption. If there is a lien on the vehicle, a debtor must be current on the car payments in a chapter 7 to keep the vehicle.
If a debtor has more equity in the vehicle than the available exemption, there are several options to protect that equity. A debtor may choose to file chapter 7 and negotiate a short payment plan to “buy back” the non-exempt portion of the vehicle. This may work where there is only a small non-exempt amount (for example the debtor’s equity in the vehicle is worth $6000 so the debtor must pay $1000 to the bankruptcy trustee). Another option is to look for other exemptions that may apply. Some debtors may be able to exempt their vehicle under the “tools of trade” exemption. This can be tricky though. The vehicle must be necessary to the debtor’s employment, not just to get the debtor to and from work.
Where the debtor has a significant amount of non-exempt equity in a vehicle or other asset, a chapter 13 can be used to protect and retain assets. In a chapter 13 debtors do not turn over their non-cash assets to the trustee for liquidation. Generally, however, the value of all non-exempt assets must be paid into the chapter 13 plan for distribution to unsecured creditors to the extent that the unsecured creditors would have received any distribution under a chapter 7 bankruptcy (simply put, a debtor with equity in a vehicle of $20,000 may be required to pay $15,000 to unsecured creditors through chapter 13 plan payments, though there are several caveats and possible reductions that will likely be taken into consideration, however the asset will be protected and debtor will be able to keep the vehicle).
Can I keep my home in bankruptcy? Much like the vehicle, in Colorado, a debtor can claim a $60,000 exemption against the equity in the home (the exemption is $60,000 whether the case is a joint case or not). A debtor over 60 years of age or with a disability may claim a $90,000 exemption in the home. In a chapter 7 a debtor must be current on the mortgage payments. A chapter 13 can be used to catch up payments when payments are not current, or to pay excess equity if the situation calls for it. More often the issue is that there is little or no equity and a debtor wants to save their home by catching up arrears through chapter 13.
Will I lose my job if I file for bankruptcy? Employers are forbidden from terminating an employee simply for having filed for bankruptcy. This can be a sticky area because employers may find other reasons to terminate employees but if a debtor believes that the bankruptcy was the actual reason for termination, an employment attorney or bankruptcy litigation attorney should be consulted.
If fears of losing assets or employment are keeping you from filing bankruptcy, now is the time to speak to an experienced bankruptcy attorney to learn how bankruptcy works. At Greenwald & Hammond experienced attorneys will address your specific circumstances in your free initial consultation so that you know exactly how bankruptcy will work for you. Contact us today to meet with a compassionate female attorney who will listen to your concerns and answer your individual specific questions.
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