In 99% of Chapter 7 bankruptcy cases, people keep their homes and cars states Sauk Village bankruptcy lawyer. They just need to continue to make their mortgage payments and their auto payments. If there is a chance that someone is going to lose their house or car, I will let them know and they can make an educated decision. If they decide it’s worth it to give up that property in exchange for the fresh start, then there is no problem. They can do that.
If I see in the initial consultation that there is going to be significant equity in property, whether it be real estate, vehicles or any other kind of property, I am going to advise my client that filing Chapter 7 bankruptcy may not be the best option. Chapter 13 is the Chapter where you keep all of your property and you repay either all or a portion of your debt over time. The great thing about Chapter 13 is that creditors must receive over the course of a three to five year payment plan at least what they would receive if you did a Chapter 7 liquidation. This is known as the Chapter 7 liquidation test that a Chapter 13 trustee wants to know about. You keep all your property. You pay what creditors would have gotten if your property was liquidated in a Chapter 7. So the Chapter 13 trustee has to factor in the cost of sale, the cost of administration to determine what would be available for creditors. The trustee then looks at your payment plan which is for a three to five year period based on your income and your expenses and determines whether or not creditors are getting at least what they would be getting in the Chapter 7 liquidation. If creditors are not getting what they should be or at least what they could be in a Chapter 7 liquidation case, then the bankruptcy Chapter 13 trustee will not recommend your case for confirmation and your plan payment or the amount that you are paying over the three to five years will have to go up.
Very often, you have Chapter 7 liquidation issues where we feel a certain way and the trustee feels a different way. Confirmation hearings are in front of the judge. The judge will make the final decision. The attorney for the Chapter 13 trustee will stand up and either recommend or not recommend that a case be confirmed. If the trustee does not feel that the case should be confirmed and we as attorneys for the debtor feel it should, we can ask for a hearing on the merits. It is at that hearing that the judge will recommend or not recommend a case be confirmed. It is at that point that we can make amendments to the petition and the plan if we need to raise the amount paid per month or we might be able to get our case confirmed by standing up to the trustee and arguing zealously for the benefit of our client. This is one major reason why you should not try to file bankruptcy yourself.
So clients will be able to keep their house and car in a Chapter 7 bankruptcy case provided there is not significant equity that the trustee can take and if they do a Chapter 13, they definitely keep all of their property. They just must repay to their creditors at least what the creditors would get if the case was one of a Chapter 7 liquidation case.