Finding yourself overwhelmed by debt can be exhausting. Your worries focus on losing everything important, specifically your home and car. While the future may feel uncertain, filing for bankruptcy in Pennsylvania can provide the breathing room you need. Contrary to popular belief, this option does not automatically mean losing your property.
Protecting your assets through Chapter 7
Under federal law, you can keep your property if your equity meets legal exemptions. Equity is simply your home’s market value minus what you still owe on the mortgage.
The Federal Homestead Exemption allows you to protect up to $31,575 in equity as a single filer. If your equity is below this limit, the bankruptcy trustee cannot sell your home to pay creditors.
As for cars, you can protect up to $5,025 in vehicle equity. If you rent or have very little home equity, you can use a Wildcard Exemption to add up to $17,475 in additional protection. This often allows you to keep cars worth $20,000 or more, even if you paid them off fully.
Catching up and reducing costs with Chapter 13
If you are behind on payments or have too much equity to qualify for Chapter 7, Chapter 13 offers an alternative.
For houses, Chapter 13 allows you to take your missed payments and stretch them out over a manageable three-to-five-year plan. As long as you make these payments, the bank cannot foreclose on your home.
On the other hand, if your car is worth much less than what you owe, Chapter 13 may allow for a cramdown. This reduces your loan balance to the car’s actual market value, potentially saving you thousands of dollars while ensuring you keep your keys.
Moving forward with no worries
Bankruptcy can be a legal tool that you can use to have a fresh start with your finances. However, the nuances of federal law can be confusing to navigate alone. Before taking action, seek legal advice to gain the guidance you need in securing your future. A Pennsylvania bankruptcy attorney can review your case and offer options that apply to your situation.