Can I keep my house and car if I file for bankruptcy?

Whether you can keep your house and car if you file for bankruptcy depends on several factors, including the type of bankruptcy you file, the amount of equity you have in your property, whether you are current on your mortgage or car loan payments, and the bankruptcy exemptions available under California law. Filing for bankruptcy does not automatically mean you will lose your home or vehicle. Many individuals can protect essential assets through the exemptions and legal protections available during the bankruptcy process.

Keeping Your House and Car in Chapter 7 Bankruptcy

In Chapter 7 bankruptcy, also known as liquidation bankruptcy, a court-appointed trustee may sell non-exempt assets to repay creditors. However, California provides bankruptcy exemptions that can protect qualifying equity in a primary residence and vehicle. The amount of protection depends on which exemption system applies, the property’s value, outstanding loan balances, and other eligibility requirements.

California offers two alternative bankruptcy exemption systems under California Code of Civil Procedure Sections 703.140 and 704. Debtors generally must choose one system rather than combining exemptions from both. California’s homestead exemption can provide substantial protection for qualifying home equity, although the applicable exemption amount varies and is subject to periodic adjustments.

For vehicles, California also provides exemptions that may protect some or all of a car’s equity. However, an exemption protects equity from certain bankruptcy claims; it does not automatically eliminate a mortgage or vehicle lender’s lien. Borrowers must consider their loan obligations and available legal options when determining whether they can retain financed property.

Keeping Your House and Car in Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows eligible individuals with regular income to reorganize their debts through a court-approved repayment plan, typically lasting three to five years. Unlike Chapter 7, Chapter 13 generally allows debtors to retain property while making required payments under the plan.

One important advantage of Chapter 13 is the potential to catch up on overdue mortgage payments over time while maintaining ongoing mortgage payments. Depending on the circumstances, certain vehicle loans may also be addressed through the repayment plan, potentially allowing borrowers to retain their vehicles while resolving outstanding debt.

However, keeping property under Chapter 13 depends on factors such as income, repayment obligations, the amount owed to secured creditors, and the feasibility of the proposed plan. Bankruptcy protection does not guarantee that every homeowner or vehicle owner will be able to retain their property.

How Is Home or Vehicle Equity Calculated?

Equity is generally the difference between an asset’s current market value and the outstanding debt secured by that asset.

For example, if your vehicle is worth $20,000 and you owe $12,000 on the car loan, you have approximately $8,000 in equity. Whether that equity is protected depends on the applicable bankruptcy exemption and your individual circumstances.

The same principle applies to a home. Understanding the property’s market value, mortgage balance, and available homestead exemption is an important step in evaluating whether bankruptcy could put the property at risk.

Speak With a San Diego Bankruptcy Attorney About Protecting Your Assets

Before filing for bankruptcy, it is important to review your financial situation with a qualified bankruptcy attorney. Choosing between Chapter 7 and Chapter 13 can have significant consequences for your home, vehicle, debts, and long-term financial stability.

Shanner & Associates can help you evaluate your bankruptcy options, understand California’s property exemptions, and explore legal strategies for protecting your home and vehicle. An individualized legal assessment can help you make informed decisions about your financial future.