In most cases, the answer is yes. In Chapter 7 cases, it depends largely on how much equity you have in your home or vehicle. (Equity is the difference between what you owe on an item and what it is worth.) For the most part, if (1) the equity in your house or auto is not more than the exemption for that type of property, and (2) you are current on your payments, you can keep it. (If you are behind on your home or car payments, you may need to consider Chapter 13.)

Example 1: Bob and Mary are married and own a home in Montgomery County worth $140,000. They owe $100,000 on the mortgage loan. After subtracting the value of the home ($140,000) from the amount they owe ($100,000), they have $40,000 in equity in their house. The current federal exemption for equity in a home is $50,300 for a married couple ($25,150 for an individual). Because the amount of Bob and Mary’s equity ($40,000) is less than the exemption of $50,300, John and Mary can exempt all of the equity in their home. Thus, as long as Bob and Mary are current on the payments at the time of filing and continue to make payments during and after their bankruptcy, they can keep the home.

Example 2: Jane owns a car that is worth $12,000. She owes $10,000 on an auto loan, leaving her with $2,000 in equity in the car ($12,000 minus the $10,000 loan). There is an exemption of $4,000 for motor vehicles. Because her equity ($2,000) is less than the available exemption ($3,450), Jane’s equity in the vehicle is exempt. As long as Jane is current on her auto loan payment and continues to pay on time, she can keep the car. Some auto lenders require a “reaffirmation agreement,” which we will discuss elsewhere.

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