Common Bankruptcy Questions, Part III

Continuing with our series of common bankruptcy questions, we pick up with perhaps the most commonly asked question of all in bankruptcy cases: whether you get to keep your house and car. Like we've discussed previous times in this space, the primary determining factor behind this comes down to equity. Because a Chapter 7 bankruptcy is a liquidation of your assets, the liquidation analysis begins with a determination of whether, after all liens are paid, there is any equity that could be liquidated that would return any value. Thus, if you do not have much, or any, unprotected equity in your house and car, you will get to keep them as long as you remain current on the payments.

Along the same lines, people filing bankruptcy frequently wonder if they will be able to keep their retirement accounts after filing. The answer to this in the vast majority of cases is yes. Exemption laws provide protection for those retirement accounts that are ERISA qualified. Thus, most of the time your retirement account will be 100% protected throughout the bankruptcy, whether it has $1,000 or $50,000.

Another common question deals with various debts. Clients often ask whether they can file bankruptcy on utility bills, student loans, taxes, marital debts, and back child support. In these instances, the only debts you can file on are utility bills. Those debts are discharged, but you may still be required to post a security deposit in the future to ensure payment. For the others, though, they are usually nondischargeable. With marital debts, if you are obligated to pay certain debts as the result of a divorce decree, you will be obligated to pay that debt and it will be nondischargeable in bankruptcy.