House / Car / Foreclosure / Liens

How will filing for bankruptcy affect ownership of your home or your car? What about in cases of foreclosure or liens?

Most Chapter 7 bankruptcy filers can keep their homes as long as they keep current on their mortgage payments. Some will lose their home if they have significant equity that can be used by the trustee to pay unsecured creditors. For those planning on walking away from the home, Chapter 7 bankruptcy can delay foreclosure for a short period of time.

It is important to distinguish between losing your home in bankruptcy (which happens when the bankruptcy trustee sells your home to pay unsecured creditors) and losing your home outside of bankruptcy (that is, through the normal foreclosure process). These are two are separate processes.

If you are behind on your mortgage payments, you will eventually lose your home in foreclosure outside of the bankruptcy process, even though the bankruptcy trustee does not sell your home as part of the bankruptcy.

In most cases, you will be able to keep your car. See more under “Repossessions.”

As for liens, even though bankruptcy wipes out your personal obligation to repay a secured debt, the creditor’s lien on your property survives your Chapter 7 bankruptcy case (unless the property is returned to the creditor).

For more information on these often-complicated issues, please contact the offices of Salinas bankruptcy attorney Guenther Law Group. Your initial consultation is free and you are under no obligation to retain us.