Some analysts have speculated that the homebuyer’s tax credit artificially supported the housing market, and now that this credit has ended, the impact of foreclosures and a glut of homes for sale will depress prices in many areas. However, an improving economy could offset that trend and increase demand for homes as the job market improves. 

In many cases the federal bankruptcy laws can help a family deal with a home that is losing value.  During a Chapter 13 bankruptcy a debtor is able to strip away an entirely unsecured second and/or third home lien.  A junior lien is unsecured when the senior lien is more than the value of the home.  An unsecured junior lien can be stripped and the debt discharged during a Chapter 13 bankruptcy. 

A Chapter 13 bankruptcy also provides an opportunity to negotiate with the lender for a modification of the debt.  In some cases the lender may reduce principle or interest and modify the existing note, making staying and paying on the home a more attractive option. 

During Chapter 7 or Chapter 13, a debtor is able to walk away from a house and discharge the debt.  In this way bankruptcy can be used as a financial tool to relieve the burden of a declining investment. 

If you are struggling with debt and overwhelmed by a home that is depreciating in value, speak with an experienced bankruptcy attorney and discuss your options.  Your bankruptcy attorney can help you devise a plan to eliminate your debt and improve your financial situation, both short term and long term.

However, it’s not practical to take everything a person owns.  Consequently the federal bankruptcy laws balance the rights of the creditors to receive payment against the need of the debtor to remain able to provide food, clothing, and shelter for his family.  The bankruptcy laws allow the debtor to keep reasonable and modest amounts of furniture, clothing, jewelry, and, in most cases, a home and car. 

Keeping a vehicle after filing Chapter 7 depends on three questions.  First, “Is the vehicle worth more than you owe?”  Vehicle equity must be protected with exemptions.  The bankruptcy laws allow a Chapter 7 debtor to keep a modest amount of equity in a vehicle, and other exemptions may be available to protect larger amounts of equity.  In basic terms, if you have a new Cadillac, and it is paid for (meaning a large amount of equity), the car will be taken and sold to pay creditors. 

Second, “Is the vehicle worth less than you owe?”  In some cases the debtor’s vehicle loan is a great deal more than the vehicle is worth.  In those cases the bankruptcy laws allow the debtor to pay the amount the vehicle is worth and discharge the difference.  This process is called “redemption” and the fair market value of the vehicle must be paid to the creditor in one lump sum.  Additional financing is often required to obtain the lump sum payment, although the money can come from any source. 

Since a loan secured by a vehicle must be paid or the vehicle returned, the final question is, “Are you able to continue making payments?”  If you are unable or unwilling to make the monthly payment, the vehicle may be surrendered back to the creditor, and you owe nothing.  If you want to continue making payments on the auto loan, you should discuss a reaffirmation agreement with your attorney.  Generally, a reaffirmation agreement is filed with the bankruptcy court and continues the loan obligations of the lender and borrower. 

If you are interested in keeping your vehicle after a Chapter 7 bankruptcy case, speak to your bankruptcy attorney and discuss your options of surrender, reaffirmation, or redemption.  Your attorney can explain the benefits of each process and map out a plan to keep your vehicle before you ever file your case.

Well, you can stop worrying about barrel chafing because there are many legal protections that allow you to keep household property during bankruptcy.  These protections are generally limited to “common sense” amounts and typically apply to clothing, household furniture, musical instruments, books, electronics, appliances, etc.  

One stated goal of bankruptcy is to give the debtor a “fresh start,” so Congress and state legislators attempt to balance the requirement of the debtor to have basic necessities against your creditors’ interests in receiving payment for your debts.  The idea is to permit the debtor the things he needs for day-to-day living while prohibiting the debtor from living a lavish lifestyle at the expense of his creditors.  For instance, if you have a Steinway grand piano worth $50,000 in your living room, it will likely be taken and sold to pay creditors.  If you have a family piano worth $2,000, you can likely keep it. 

The truth is that only around four percent of Chapter 7 bankruptcy cases are “asset cases,” meaning the bankruptcy trustee receives money or an asset from the debtor.  In the vast majority of these “asset cases” the debtor loses a car or real estate in which he has too much equity.  It is very rare to see a debtor lose any household item during a Chapter 7 bankruptcy.  Debtors in Chapter 13 keep their property. 

Determining whether a household item is at risk is a simple arithmetic calculation.  First, start with the liquidation value of the item.  Often this value can be determined by looking at yard sales or internet auction sites like Ebay.  Next subtract the applicable state or federal exemption amount for that item.  Any remaining sum is unprotected equity.  Your bankruptcy attorney can discuss your options for protecting and keeping items with unprotected equity. 

It is important to correctly describe, value and apply the proper exemptions to household items in your bankruptcy schedules.  Once you have provided an adequate description and value of your household items, your attorney can apply the proper exemptions and protect your property from turn-over to the bankruptcy trustee.  Discuss any high-dollar household item with your attorney to ensure that you obtain full legal protection for your property.

To understand how to value household property for bankruptcy purposes, it is important to understand the bankruptcy process.  One of the chief functions of the bankruptcy trustee is to uncover assets for the benefit of creditors.  Federal and state laws allow the debtor to keep certain modest items of household property that are considered “necessary,” like clothing and household items, but only up to a certain dollar amount.  That amount is called an “exemption,” and that property is considered “exempt” and protected from a creditor’s collection remedies.  Any property that is worth more than the allowed exemption amount is subject to be liquidated, usually at auction. 

So the easy answer to how household property should be valued is, “At auction prices.”  Since auction prices can vary, that doesn’t really answer the question at all.  Instead, what most bankruptcy trustees suggest is to set a price like you would at a yard sale.  Additionally, internet resources like eBay can be helpful to determine the quick-sale market value of a unique item.  Using one of these on-line resources can provide good evidence that your new-in-box Barack Obama Chia Pet is only worth $20.00. 

Many used household items, like common dinner dishes or bedding, have little or no value.  On the other hand, a grandfather clock, piano, or gun safe usually has some value. A bankruptcy trustee is not in the used furniture business, and will usually incur significant costs in selling a debtor’s property. Consequently, the trustee will not be interested in your household property unless you own a non-exempt item that can be sold for a substantial profit to the bankruptcy estate.  

As owner of your property, you are entitled to give an opinion regarding its value.  It is important not to under-value or over-value your household property, but instead give a fair and reasonable estimate.  If you own an expensive household, do some research and speak to your bankruptcy attorney.  There are many ways to protect property in bankruptcy and your bankruptcy attorney can help you decide on the best course of action.