Let’s Ask ESSER: If I declare Bankruptcy, will I lose my house and my car?

Q:
If I declare Bankruptcy, will I lose my house and my car? I am worried that I’ll have to go back to living with my parents and borrowing the family car.
– John in Milwaukee

A:

Since 1982, multi award winning attorney Todd C. Esser has been leading the field, serving the community, and helping consumers just like you achieve success through trying financial times.

There are really two questions within that question. 1.) Will the Trustee in bankruptcy make me sell my house or my car? And 2.) Will my lender try to repossess or foreclose my car or my house?

The answer to question number 1 is: not likely. A trustee in bankruptcy is not going to force you to sell your house or your car unless there is more equity in that asset than you can exempt or protect from the claims of your creditors. Exemption laws are the laws that set forth how much equity you are allowed to retain in an asset that you may own as of the date of filing. In Wisconsin, we can select under either Wisconsin or federal bankruptcy exemption laws, whichever provides the greater advantage. In Wisconsin, an individual can exempt up to $75,000 equity in their homestead ($150,000 in a joint filing) and up to $16,000 under vehicle and personal property exemption laws for a car. In the typical scenario that we see, it is rather unusual for someone who is looking at filing bankruptcy to have more than that in equity in a house or a car.

The resolution of question number 2 is dependent upon: between you and the lender, are you current on your loan payments? The bank is not going to call your note just because they received notice that you filed bankruptcy if your payments remain on time. Under the Wisconsin Consumer Act, if you are current on your finance contract payments on your car, the lender is prohibited from taking any action to repossess your car. In the event you are behind on payments, it is possible to negotiate terms to resolve the payment arrears with your lender as part of a reaffirmation agreement.

Looking forward to your good financial health!

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