How to Keep Your Stuff in Bankruptcy

Many of the clients I meet with believe that if they file bankruptcy, they will lose all their stuff, i.e. cars, house, etc.  About the same number of clients believe that if they file bankruptcy they can keep the stuff they owe on without paying for it.  Neither of these beliefs are true.

First, the great majority of people who file bankruptcy can keep the stuff they want to keep.  If you file a Chapter 7 bankruptcy, you must continue to pay for the stuff as per your original agreement with the lender.  If you file a Chapter 13, you can pay for the stuff through a plan and many times reduce your interest rate, payments, and sometimes even the balance to be paid back.  A Chapter 13 will also take care of payments you have missed prior to filing.

Even though a bankruptcy can sometimes help with payments, you still must pay for most property for which you owe.  The most common exception to this rule is for what the bankruptcy law call "non-purchase money security interest in household goods."  These are debts where when you borrow money, normally from a finance company, the lender asks you about appliances, furniture, electronics, or tools you already own and lists these items as collateral for the loan.  The bankruptcy law allows you to avoid these liens in many circumstances, and thereby keep this type of stuff without having to pay the debt on it.
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