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How Does Bankruptcy Affect My Assets?

How Does Bankruptcy Affect My Assets if I file bankruptcy in Illinois?

Q: What if there is a foreclosure sale date scheduled for my house?

A: If there is a foreclosure sale date scheduled your home or another property you own, and you want to keep that property, we strongly suggest you schedule a consultation as soon as possible, since there is considerable information needed to file your bankruptcy prior to the sale of the property.  Once your property is sold at a foreclosure sale you no longer have the ability to save it with a Chapter 13 bankruptcy, at lease not here in the Northern District of Illinois.

Q: Can I file a Chapter 7 bankruptcy and keep my house and car?

A: It is unlikely a person will lose their house or car after filing Chapter 7 bankruptcy. However, there are two important factors that must be considered before filing Chapter 7 bankruptcy. First, are you current on your payments? Second, how much equity do you have in your house or car? If you are current on your payments and you do not have excess equity in your house or car, you should be able to file Chapter 7 bankruptcy and keep your house and car. If you have multiple cars in your name, you should speak with a bankruptcy attorney to determine if all the cars can be protected.

Q: Will filing Chapter 7 bankruptcy reduce my car payment? House payment?

A: Filing Chapter 7 bankruptcy will not reduce your car or mortgage payments. If you keep your property you will be obligated to make the regularly scheduled payments.

Q: Will filing Chapter 13 bankruptcy reduce my car payments?

A: If you purchased your car more than 910 days (2 ½ years) prior to the date you filed bankruptcy, you may be able to reduce the secured amount owed on the car to the value of the car based on National Automobile Dealers Association (NADA) retail value, and pay the difference as an unsecured claim. This is known as a cramdown. Use this time duration calculator to see if you have had your vehicle more than 910 days.


Q: Will filing Chapter 13 bankruptcy reduce my house payments?

A: No. The bankruptcy courts do not have the power to reduce your loan amount or interest rate on your home.

Q: Will filing bankruptcy stop my creditor from placing a lien on my property?

Once your bankruptcy is filed the automatic stay goes into effect, stopping your creditors from proceeding with any legal actions against you including the placement of a lien on your property.

Q: Can I give up or surrender my house in bankruptcy if I don’t want to keep it?

A: You can surrender your house in either a Chapter 7 bankruptcy or Chapter 13 bankruptcy if you can no longer make payments, plan to move, etc. If you change your mind and decide to surrender your home after filing a Chapter 7 bankruptcy but before your discharge, you should contact your attorney about changing your Statement of Intentions and rescinding a reaffirmation agreement if it was signed on the home. If you are in a Chapter 13 bankruptcy, surrendering your home will not automatically lower your Chapter 13 bankruptcy payments. You should contact your attorney to discuss what options are available to you.


Q: Can I give up or surrender my car in bankruptcy if I don’t want to keep it?

A: You can surrender your car in either a Chapter 7 bankruptcy or Chapter 13 bankruptcy. If you change your mind and decide to surrender the car after filing a Chapter 7 bankruptcy but before your discharge, you should contact your attorney about changing your Statement of Intentions and rescinding the reaffirmation agreement if it has already been signed on the car. If you are in a Chapter 13 bankruptcy, surrendering your car will not automatically lower your Chapter 13 bankruptcy payments. You should contact your attorney to discuss what options are available to you.


Q: What will happen to my personal property during bankruptcy?

A: Most personal property such as cash, bank accounts, furniture, clothes, and retirement plans can be protected by exemptions allowed by each state. Most people that file bankruptcy are allowed to keep most, if not all, of their personal property.


Q: What will happen to my retirement account if I file bankruptcy?

A: Most legitimate retirement accounts are protected from your creditors. Usually, the retirement account must be an IRA or an ERISA qualified retirement plan.

Q: Is my Social Security income protected?

A: Income from the Social Security Administration is protected and is not included in the Means Test calculation. It will be used, however, to determine your future earnings.


Q: Do I need to include leases in a bankruptcy?

A: You should list all leases. You may choose to assume (keep) or reject (give up) a lease in your bankruptcy. If you assume the lease you will be responsible for making payments and that debt will not be discharged or eliminated by the bankruptcy. A lease that is rejected will be listed as a creditor and that debt should be discharged in your bankruptcy.


Q: Will filing bankruptcy stop garnishments?

Filing bankruptcy will not stop of the garnishment of domestic support obligations for ongoing child support and alimony awarded by the court. However, domestic support arrearage, the amount you are behind, can be included in the Chapter 13 bankruptcy plan payments, so the wage garnishment may be reduced for that portion of the child support or alimony payment.

Filing Chapter 13 bankruptcy will stop the garnishment from the Internal Revenue Service and/or a state’s department of revenue for taxes.

Unfortunately, the wage garnishment will not stop until your employer receives paperwork from these entities instructing them to stop the garnishment.

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