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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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I filed for bankruptcy a few days ago and am wondering ...

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I filed for bankruptcy a few days ago and am wondering if you have a 1st and second mortgage and your house is worth less then what you owe can you file the debted amount that is over what the house is worth and still be able to keep your house as long as you make the payments.I also would like to know if you have a loan and your car is secured with it can you file for the debted amount that is above what the car is worth and still keep your car with the debt only being what the car is worth.
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 6 years ago.

Hi Don:

What options a debtor in bankruptcy has is based on which chapter he or she filed: 7 or 13.

You can only get rid of second mortgages in Chapter 13, and only when the amount owed on the first mortgage exceeds the value of the home. I have been doing these a lot lately. Generally, though, in Chapter 7 the debtor has to keep all mortgages in order to keep the house. But, a particular division may have different case law, so this is a good one to ask your attorney.

Regarding cars, if a debtor owes more on a car than it is worth (called "being upside down" on the loan), in Chapter 7 the debtor can file a Motion to Redeem the vehicle, in which the court orders the creditor to accept a one-time lump sum payment for the value of the car, not the amount owed. A company that frequently gives loans to debtors in Chapter 7 to redeem cars is called 722 Redemption Funding, here. In Chapter 13, the debtor can also sometimes only have to pay what the car is worth, not what is owed. In Chapter 13, this is called "cramming down" the car. Cars on which debtors are upside down can be crammed down in Chapter 13 if the car loan is more than 910 days old (about 2 1/2 years) from the date the bankruptcy petition is filed. If the loan is old enough, the debtor only has to pay the value of the car, not the amount owed, through the Plan to keep the car.

I hope this helps and a positive feedback is always appreciated if this was useful to you.

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
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