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One of the most common questions attorneys at Acker Warren, P.C. are asked by potential client’s is, what happens to my house and car in bankruptcy?

The short answer to this question is that you almost always may keep and continue to pay for you home and car. However, it depends on a multitude of factors, for instance, what state you live in, if you are current on the payments, is it your only house or vehicle, what other property do you own, etc.?

To more thoroughly understand what happens to a home or vehicle in bankruptcy an explanation as to the different types of debts, the different types of assets, and the different chapters of bankruptcy is necessary.

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When you file for bankruptcy under Chapter 7 or Chapter 13 it can stay on your credit report for up to 10 years. Luckily for most of our clients, the bankruptcy being reported on their credit report isn’t too damaging. Most of our clients actually see their score improve, because their debt-to-income ratio instantly improves, and because creditors are required to remove any negative reporting from the credit report. As a result, getting a car, loan, or credit card is typically not difficult.

Additionally, there are actions you can take on top of filing bankruptcy in order to hasten the process of improving your credit score. This post details some strategies to achieve that goal.

Chapter 7

You can discharge most, if not all, of your debts after filing for Chapter 7 bankruptcy. This means that a lender cannot collect a discharged debt, and you’re no longer responsible for repaying it.

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Medical bills are a very common reason people file for bankruptcy. For those who cannot pay their medical bills and do not file for bankruptcy, their situation likely will worsen.

If you are unable to pay medical bills, you’ll start getting late-payment notifications, and late fees will accrue. The medical provider may sue you in the future and win a monetary judgment against you, or it could also result in wage garnishment, a bank levy, or the placing of a lien against your non-exempt property.

Medical Bankruptcy

If you can’t pay the bill and it appears that the creditor will pursue you for payment, your good credit will suffer since a collection action will appear on your credit report. If they sue you and win the case, the medical provider could garnish your bank account or pursue other collection measures. When it comes to bankruptcy, filing as soon as possible could help you get back on your feet financially faster.

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You may be asking, though, how you can keep your car when filing for bankruptcy.

There are two main types of bankruptcy: Chapter 7, which involves liquidating non-exempt assets (in Texas thankfully very few assets, for most people, are non-exempt), and Chapter 13, which focuses on debt repayment. What will happen to your vehicle if you file for bankruptcy is determined by the type of bankruptcy you declare and the amount of equity you have in your car.

In case you file Chapter 7

Most of your debts are discharged, meaning your legal liability to pay the creditor/ debt has been extinguished in Chapter 7 bankruptcy. In exchange, you must surrender non-exempt property which the bankruptcy trustee will sell and use the funds to pay your unsecured creditors. In Chapter 7, the ability to keep your vehicle is determined by whether or not your equity is classified as exempt and whether or not you are behind on your car payments. (Equity = Balance of Loan – Vehicle Value) An experienced attorney can help you navigate the potential pit falls of filing for bankruptcy with a vehicle that you want to keep or surrender. It is extremely unlikely to have a non-exempt vehicle in a Chapter 7 bankruptcy.

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If debt has taken over your peace of mind, you may be considering filing for bankruptcy. An experienced attorney can explain your choices and help you find a solution to collection letters and harassing phone calls from creditors. Bankruptcy can alleviate your financial stress and provide a fresh start.

If you’re considering filing for bankruptcy, you’re probably worried about losing your house, car, or other valuables. This is where the experience of Acker Warren, P.C. can help. An experienced lawyer can assess your case and come up with a solution that is beneficial for you and helps you retain your assets.

Filing for Chapter 7 and Chapter 13

When choosing how to stop foreclosure proceedings in Texas, one option is to declare bankruptcy. The automatic stay is in effect immediately upon filing of a Bankruptcy Petition. The Automatic Stay halts all collection actions against a Debtor including foreclosure. Your mortgage creditor is prohibited by the Court from moving forward with foreclosure once the case has been filed.

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