When going through bankruptcy, the most common question that occurs in people’s minds is whether they can keep their homes during and after the situation. This happens as people are petrified of losing their possessions once they are declared bankrupt. Within Chapter 13 of bankruptcy, individuals need to follow a regimented prepayment plan for a few years until their debts are wiped clean. During this period they do not have to surrender their homes and possessions. This can be done until and only when any creditor does not have any liability on their property and possessions. For instance, those entitles to a mortgage loan may need to consistently make periodic paybacks without having to go through foreclosure. Filing for Chapter 13 in bankruptcy will help applicants catch up on these balance paybacks.

Chapter 7 on the other hand will help individuals wipe out their slates from any past obligations by liquidating their nonexempt assets and possessions. It is essential that individuals find the means to take care of unpaid expenses and expenditures. Liquidating a few valuable items may be the ideal option to take care of these expenses. Applicants should note that most of their possessions such as vehicles and homes are exempt from being claimed by financing institutions. The federal bankruptcy code itself includes exemptions from $500 up to $10,000. 

All retirement funds and pension plans are protected by this code up to $1 Million. Hence, it is preferential to declare bankruptcy rather than liquidating certain assets to make outstanding payments. Applying for Chapter 7 bankruptcy will render creditors unable to get hold of the applicant’s assets and possessions which could occur due to an unsecured debt that may occur from a credit card discharge.

In the long run, either for better or worse, many individuals who have made the decision of opting for bankruptcy, do not have many valuable possessions and assets hanging around. The most vital asset that they possess is their home and thankfully enough this is covered by a code of homestead protection. Majority of the states have a certain level of homestead protection that enables to avoid the creditor’s hands from claiming a bankrupt individual’s home equity.