Will I lose my house, car or household items when I file bankruptcy?

In most cases, the answer is no.  But that requires a little further explanation.  What you are saying to the court when you file Chapter 7 bankruptcy is I really have no money to pay my creditors back anything.  So what the court will be looking at when determining whether you can keep your house, car, or other household items is the equity or value of those items.  For instance, if you own a house free and clear which is worth $100,000, you can’t really say to the court that I have no money to pay my creditors back anything.  But any good attorney would not let you file Chapter 7 bankruptcy in that case.  Or at least have you understand that you are trading your fresh start for your house because what would happen in that case is the trustee would take the house, sell it, give you back $15,000 in Illinois based on your household exemption and pay back your creditors with the rest.

In Chapter 13, this is treated a little bit differently.  Chapter 13 is a reorganization of your debt in which you are going to pay your creditors back anywhere from 10% to 100% over 36 or 60 months.  During Chapter 13, your assets will be protected as long as you are willing to pay back the value to your creditors.  In the same example, if you had a $100,000 house that was paid in full, you would have to at least pay back what the equity was worth to your creditors.  This might be advantageous if you have a significant amount of income.


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