Often, the first question that a person considering bankruptcy has concerns how the bankruptcy will affect his or her property. There is no simple answer to this. The impact of a bankruptcy depends on factors like the type of debt that a person used to acquire the property, the income that a person currently earns and what the person’s long-term goals are. Below are overviews of how a bankruptcy could affect important assets like your home, small business, automobile or retirement money. A Maryland bankruptcy attorney can assist you in understanding how filing for bankruptcy will affect property that you own.
Bankruptcy and Your House
While a Chapter 7 bankruptcy can eliminate many of your debts, the bank is still able to foreclose on your home if you fail to make your mortgage payments. We refer to this type of debt as secured debt. Your home serves as collateral so that the bank will not lose the money that it lent to you in the event that you are unable to continue making payments. If you do not make your home payments, the bank can take back the home, sell it and use those proceeds to satisfy the debt you owed.
There is a bankruptcy exemption available in most states for your house, but this is not always sufficient. In Maryland, there is no homestead bankruptcy exemption. Washington DC has the most generous homestead exemption in the country, as its bankruptcy law completely protects your personal residence. The federal homestead bankruptcy exemption protects real property up to $20,200. Federal exemptions are available in Washington DC, but not Maryland.
There are alternatives to repossession if you are considering filing for Chapter 7 bankruptcy and do not believe you are able to make your mortgage payments. You and a bankruptcy attorney may be able to achieve a loan workout with your bank that renegotiates payment terms over a period of time and at an amount that you can afford.
Additionally, for people with a steady income, a Chapter 13 bankruptcy may be a better alternative. A Chapter 13 bankruptcy will let you keep your house. The bankruptcy court will devise a repayment plan over the next three to five years that you will need to follow.
Bankruptcy and Business Assets
When you file for bankruptcy, you must include business assets. To protect your business assets as much as possible, you will have to use bankruptcy exemptions to keep the bankruptcy trustee from selling those assets to satisfy your personal debts. In cases where the bankruptcy filer is almost exclusively responsible for the business’s success, the trustee will be less likely to liquidate the business, as that would eliminate the best chances for the filer to regain his or her financial footing following bankruptcy.
Another important consideration is the type of business – whether it is a partnership, sole proprietorship, corporation or something else. The form of the business will determine what the law can do with it in the event that you file for personal bankruptcy.
Bankruptcy and Other Important Assets
Other important assets that people may worry about when considering bankruptcy include the following:
- Cars. In most cases, people finance cars via secured debt; that is, your creditor has the right to repossess the car if you fail to make payments. This makes cars similar to houses in the event of a bankruptcy filing. Your creditor is able to repossess it, but you may wish to seek a repayment negotiation directly with the creditor or via a Chapter 13 bankruptcy repayment plan.
- Retirement Accounts. Generally, retirement plans like 401Ks, IRAs or pensions are safe from bankruptcy liquidation. It is important to leave this money in the accounts if you are considering bankruptcy. The money is safe in the retirement accounts, but, once you convert it to cash, it is not.
Protecting your important assets during bankruptcy requires the assistance of an experienced and successful bankruptcy attorney. Contact a Washington DC bankruptcy lawyer at the Law Firm of Kevin D. Judd for more information on how bankruptcy will affect your property.