Do you have to surrender your home or your car if you declare bankruptcy under a Chapter 7 Liquidation?

There are several exemptions you are entitled to when you file bankruptcy.

The first and most important exemption to people is the real estate/homestead exemption. It states that $15,000 equity in your real estate in which you reside is exempt, and cannot be seized by the trustee. If you are a married couple, then the exemption equals approximately $34,000. You must calculate the current market value of your home, then deduct what would be spent on a broker's commission if the house were sold, then subtract all mortgages, then subtract capital gains tax from what would be left over. If the ret recovery would be less than the exemption, then you could keep your home and still declare a Chapter 7 liquidation bankruptcy. (Of course, you must be current on your mortgage payments. If you are in arrears, you must then consider a Chapter 13 plan to get current.)

So, for example, if you are married and own a $120,000 home with two mortgages totalling$80,000, the calculations would be as follows:

$120,000 - 7200 (broker's commission) = $112,800

$112,800 - $80,000 (mortgages) = $32,000

$32,000 - $3,200 (capital gains tax) = $28,800

The house would be exempt because the net recovery of $28,800 is less than the real estate exemption for a married couple, which is $34,000.

Each individual is also allowed a $2400 exemption in any one motor vehicle. If you own a $20,000 (current market value) car, and you still owe the bank $17,600 or more, then you can keep the car. (Again, you must be current on your car payments to do this. If you are behind, you must consider a Chapter 13 Bankruptcy)

Other exemptions inclued (per person): $8,000 worth of household goods and furnishing.

Note: Exemptions have increased under recent legislation, and the numbers reflected above may not be precise.