Hi again. Thanks for the additional info.
The first thing you have to understand is that the only way to keep collateral such as your house and car is to continue to pay the loans. This is true even if you file for bankruptcy because a secured creditor (i.e. a creditor whose loan is secured with collateral) can generally always repossess/foreclose if the underlying loan is not paid. Therefore, if your only real debts are the house and car payments, and you want to get out of paying them while keeping the house and car, then filing for bankruptcy probably doesn’t make sense in your case
Next, if you file for bankruptcy and continue to pay your loans, the house and car may still be taken by the bankruptcy trustee and sold if there is a substantial amount of equity that can be used to pay your unsecured creditors (i.e. a creditor who loan is not secured with collateral … a good example is a credit card company). In the case of your house, it doesn’t sound like there is any equity, so your house is probably secure if you can continue paying the mortgage.
You didn’t mention whether you have equity in your car, but the law will allow you to exempt (i.e. keep) up to about $3k of equity in a motor vehicle. Here’s an example to help understand what it means: Let’s say your car is worth $10k and you owe $7k on the loan. This means you have $3k of equity, but since you can exempt $3k in a motor vehicle, it cannot be sold for the purposes of paying off unsecured creditors. But, let’s say the vehicle is worth $15k instead of $10k. That means you have $8k of equity. Since you can only exempt $3k, that means $5k can be used to repay your unsecured creditors. The bankruptcy trustee would likely sell you car, pay off the car loan, pay you the $3k, then use the remainder to pay the unsecured creditors. Does that make sense?
I can’t say for sure from where I’m sitting, but it sounds like you may qualify for a Chapter 7 bankruptcy. If so, then you can be discharged in a few months. If you make above average income for your geographic region, then you will have to file a Chapter 13, which mean making monthly payments for up to 5 years. A Chapter 13 does have advantages, however, in that it kind of eliminates the paragraph I wrote above about equity, exemptions, etc. In a Chapter 13, you will be making monthly payments to your unsecured creditors, and in return you can keep assets (such as the equity in your car).
As you can see, bankruptcy is complicated. If you think it may be right for you, then I suggest you consult with a local attorney who can review all of your financial circumstances and the details of your situation, and then advise you as to whether it does make sense, what Chapter to file under, and the length of time it will take. Good luck!
Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.
DISCLAIMER: Please understand that the complexities of most legal problems cannot be adequately addressed in this setting, and that I am only licensed to practice law in the state of Maryland. Accordingly, you acknowledge (1) that we have not formed an attorney-client relationship, and (2) that my post is general information only and not specific legal advice.