One of the main reasons people consider bankruptcy is to see if they can avoid losing their home, their car, or some other valuable asset. Bankruptcy can save your assets from repossession, but you need to understand how to protect them and the various implications.
The Cleveland bankruptcy attorneys atLuftman, Heck & Associates can help you understand your options and navigate the bankruptcy process. We can halt the repossession and foreclosure process and help you reclaim your future. If you’re in danger of losing your home or car and don’t know where to turn, contact us at (216) 586-6600 to schedule a free consultation and discuss how we can help you.
Can You Afford to Keep the Asset?
Before you decide anything else, you need to make a candid assessment of whether you can actually afford to keep the asset. This is typically a question in cases where you still owe a significant amount of money on the asset, such as a car or a home. While these assets can have tremendous sentimental value for us, our emotional attachment can often overshadow the economic reality.
Bankruptcy is an opportunity to get out from under your debts and make a fresh start. By attempting to keep an asset you can’t afford, you may wind up either saddled with the asset’s debt or losing it to repossession or foreclosure despite having paid a lot of money trying to hang on to it. Our attorneys can help you prioritize your goals and decide what you can afford to keep so that you can make the most of your bankruptcy filing.
Chapter 7 vs. Chapter 13 Property
Whether or not you can protect your assets from repossession often depends on what type of bankruptcy you decide to file. The two main types of consumer bankruptcy cases are Chapter 7 and Chapter 13 bankruptcy:
- Chapter 7: Referred to as a “complete liquidation,” the bankruptcy trustee takes control all of your assets and sells them to your creditors in order to satisfy your debts. At the end of your case, you are relieved of any personal obligation for the remaining debts.
- Chapter 13: Chapter 13 bankruptcy is essentially a court-approved payment plan. It will allow you to keep any assets you wish to keep, provided that you repay any delinquency and remain current on future payments. You pay your money into the court to fund the payment plan, and the bankruptcy trustee administers the payments to your creditors.
Chapter 13 bankruptcy may seem like the obvious choice if you want to protect your assets from repossession. However, you should be aware that you have to qualify for Chapter 13 bankruptcy – the court will not approve a payment plan that you cannot afford, and your payment must treat all of your creditors fairly.
While bankruptcy may force you to surrender some of your assets, it is not intended to leave you destitute. Instead, the bankruptcy laws provide for certain assets to be claimed as exempt from bankruptcy. If you meet the requirements, these assets cannot be liquidated by the bankruptcy court or repossessed by your creditors.
Here are some common exemptions under Ohio law that you can use to protect your assets:
- Up to $475 in cash or tax refunds
- Up to $12,625 in household items
- Up to $1,600 of jewelry
- Up to $2,400 in work equipment and tools
- Up to 75% of your weekly earnings
People are often most concerned about losing their homes or cars. These can also be claimed as exempt, but are complicated if you still owe money on them. Generally speaking, you can claim these assets as exempt if you meet the following requirements:
- You have “equity” in the property that can be claimed as exempt; and
- You are current on your loan payments.
The first requirement is somewhat confusing. Equity is the value of the property minus any unpaid loan amounts. For example, if your home is worth $300,000 and you have a $200,000 remaining balance due on your mortgage, then you have $100,000 in equity in your home.
Under Ohio law, your home and your car can qualify for the following exemptions:
- Up to $136,925 of home equity
- Up to $3,775 of value in a single vehicle
Understanding these exemptions and how they apply to your assets can help you make the most of your bankruptcy filing.
Considering Bankruptcy? Contact the Cleveland Bankruptcy Attorneys at Luftman, Heck & Associates
Repossession and foreclosure are frightening prospects, but understand that you have options. The Cleveland bankruptcy attorneys at Luftman, Heck & Associates can help you make the right decisions so that you can start working towards a better future. If you want to stop repossession and harassment from debt collectors, give us a call at (216) 586-6600 or online contact form to schedule a free consultation.