How Can I Keep Secured Debt in Bankrupctcy?

You may not be personally liable for the debts discharged after your bankruptcy proceedings. However, your bankruptcy filing may not eliminate your creditor’s authority to place a valid lien on your secured debts, such as your house and motor vehicle(s). Therefore, during or after your case, they may exercise their right to initiate a foreclosure or repossession of this property. With that being said, please continue reading to learn how to keep secured debt after your case and how an experienced Louisville, Kentucky Chapter 7 bankruptcy lawyer at Schwartz Bankruptcy Law Center can advise on whether doing so is in your best interest.

How can I keep secured debt in Chapter 7 bankruptcy?

If possible, you should attempt to bring your mortgage, car payments, and other secured debt payments up-to-date before submitting your Chapter 7 bankruptcy petition. That way, your creditors may have no reason to place a lien against the property serving as its collateral. However, you should consider whether you can continue keeping up with these payment obligations post-bankruptcy. If this seems infeasible, it may be better to give up this property and eliminate this financial responsibility, unfortunately.

Secondly, you may look into the bankruptcy exemptions you may be eligible for in Kentucky. For one, you may protect up to $5,000 of equity in your primary residence and up to $2,500 of equity in one motor vehicle. However, you may prefer the federal exemption, which is up to $27,900 in equity for your primary residence. So, say your home is worth $300,000, and you still owe $280,000 to your creditor. Well, you may have $20,000 worth of real estate property to protect and use the remaining $7,900 to protect other property through the wildcard exemption.

Lastly, you may negotiate with your creditor to pay the value of your property in one lump sum payment. This is otherwise known as “redeeming” your property. However, your creditor has the right to refuse your offer if they believe you undervalued the property. This may require you to enter a valuation hearing with the Kentucky bankruptcy court.

Can I keep secured debt in a Chapter 13 bankruptcy filing?

If you are behind on your secured debts payments and there is no way of getting up-to-date before declaring bankruptcy, you may consider a Chapter 13 bankruptcy petition sooner. That way, you may receive a court-ordered repayment plan that allows you to pay off this outstanding balance at a manageable three- to five-year pace.

Importantly, though, you do not necessarily choose Chapter 13 bankruptcy; rather, you must qualify for it. That is, the Kentucky bankruptcy court must confirm that you have a reliable, steady income stream to keep up with these regular, required monthly payments. What’s more, defaulting on this repayment plan may lead to the same result, with your creditors initiating liens to foreclose on or repossess your property.

If you require further clarification on this issue, a skilled Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center is willing to offer it. So please do not hesitate to seek out our services. We look forward to helping you.