Will I Lose My Home And Or Car In A Chapter 7 Bankruptcy In Oklahoma?

In a Chapter Seven the concept to understand is exemption.

Video Transcribed:  Edward Kelley here from 188deadline And we’re finishing the series, top five questions that you ask me as a bankruptcy attorney. So, drum roll please. Number one, will I lose my car and or my house? And the general answer is no. You certainly won’t lose it unless you want to give it up, I guess it’d be a better answer. So in a chapter seven the concept to understand here is exemption. The overall idea of a chapter seven, also known as a liquidation bankruptcy, is that you liquidate or turn all of your non-exempt assets into monies to be paid to your creditors so that any debt leftover is discharged, wiped away. Those creditors lose forever the ability to collect that debt, unless you somehow reaffirm it, which you don’t want to do and we’ll talk about that in another series. But a lot of your property is exempt from being liquidated.

The idea of being, they’re not going to try to give you a fresh start by taking away absolutely everything you need to survive. So what’s exempt? Your home. Now, to what extent is your home exempt varies by state to state. Oklahoma is a really good exemption. If your house is in city limits, and this is something to remember if you do a bankruptcy, if it’s within city limits and it’s on an acre or less, you’ve got a really almost unlimited exemption. The bankruptcy court will not and cannot take your home and liquidate it. Now, if you were behind on your home, if you are in foreclosure, we’ll say a chapter seven doesn’t stop that, but a chapter 13 can and can give you the ability to force your lender to let you catch up on your mortgage. But we’re going to talk about that in a whole other series on chapter 13. But your home is exempt so the bankruptcy court doesn’t get to take it.

Now bear in mind if you have a second home, a cabin, something like that, that’s not exempt. But the home you live in, your domicile, your residence, exempt. In Oklahoma, again it varies state to state, but in Oklahoma your vehicles are exempt up to 7,500 in value for each person. So if you owe 20,000 but the car is worth 21,000, that’s only a thousand. You’re far under the 7,500. So we’re talking about 7,500 in equity.

Again, anything you own, even if it’s not exempt. So let’s say you have a motorcycle, it’s worth 10,000, you owe 12,000. Trustee in your bankruptcy, can’t liquidate that. If they take it from you, they’re going to owe $2,000. So you know that’s near and dear to you and you want to keep it, the trustee is not going to stand in your way other than if you’re behind on that motorcycle, the creditor will have the opportunity to repossess it.

Chapter seven doesn’t allow you to catch up. Again, chapter 13, different story. You can do that, but we’ll cover that in that series. Household belongings, will they take my TV? This is related questions. Will they take my bed? No. Household furnishings up to a reasonable amount, are exempt also. So the only thing you need to worry about in a chapter seven, particularly in Oklahoma, oil royalties land, other than where you live, trustees are always looking for that.

ATVs, boats, trailers, things like this. Motorcycles that are paid off. If these have value, if they can be liquidated… We’re not talking about the Sanford and Son junker truck on blocks in your backyard. That’s not going to bring any value so the trustee’s not going to want it. So, in rare cases, I have clients who desperately want to hold on to possessions and do a bankrupt and they have choices to make.

But for most people, the exemptions are going to cover everything you need. So that’s the quick answer. Unless you’re way behind and the creditor themselves have a right to repossess your personal property, collateral or foreclose on your house, which will happen outside of bankruptcy much more easily than inside bankruptcy then you’re not going to lose your home or your car. In fact, during the bankruptcy itself, those creditors are not allowed to take any sort of action against you unless they petitioned the court. I’ll deal with that, the automatic stay, in another series.

But hopefully this makes you feel a little better if that’s a question you were worried about. And that is the number one question I get from people that call me. “I’m going under, I can’t pay my bills. If I do this bankruptcy though, am I going to lose my house or am I going to lose my car?” And hopefully now you know the answer. So that concludes our series, top five questions I get as a bankruptcy attorney. So I will see you again soon. Edward Kelley at 188deadline.