How Filing Bankruptcy Can Protect Your Property from Repossession

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “How does bankruptcy protect property from repossession?”

The moment you file a bankruptcy, a judge will order all collecting actions to cease through an automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment.

Depending on what type of bankruptcy you file, you can possibly stop the repossession of your property. As long as a bankruptcy is pending, and your secured creditor has not been successful in having the automatic stay lifted by petitioning the bankruptcy court, you can maintain possession of the property without fear of the creditor coming to take the property. A violation by the creditor during an automatic stay can bring severe consequences.

There are basically two types of bankruptcies most individuals can file: Chapter 7 or Chapter 13 Bankruptcy.

In Chapter 7 Bankruptcy, commonly called liquidation of your assets, a bankruptcy court trustee will sell your non-exempt assets to pay your unsecured debts. Any unsecured debts not paid during a Chapter 7 Bankruptcy and not exempt from discharge will be discharged.

Secured debts (house or car) can possibly be reaffirmed during Chapter 7 Bankruptcy if you decide you want to keep the property. A reaffirmation agreement is just a renegotiated contract to pay the creditor an agreed upon amount for the property that is secured. Also, in some cases, the secured property may be “crammed down” to the current market value of the property so that if you have the money, you can buy the property for that amount.

In Chapter 7 Bankruptcy, if you cannot come to an understanding with the secured creditor by the time the bankruptcy closes, the property may then possibly be repossessed whether or not you are behind on the payments.

Chapter 13 Bankruptcy, commonly called a wage earner’s plan, enables individuals with regular income to develop a plan to repay all or part of their debts over three or five years. During Chapter 13 Bankruptcy, you can keep all your assets, including secured assets, but you can keep your secured assets only as long as you make your payments, keep them current, and pay them on time.

Filing for bankruptcy can give you temporary and sometimes permanent relief from a repossession, depending on how you respond to your situation, but to maximize your efforts, consult with a bankruptcy lawyer.

If you need relief from the stress of debt and you live in or around the metropolitan areas of Fort Worth or Arlington, Texas, contact us at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.

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