I Want to Give My House and Car Back and File a Chapter 7 Bankruptcy? – Sasha

“Dear Steve,

Lost my job a few years back. Got behind on my mortgage & my already high interest car payment. Filed Ch. 13 in 2011 after starting another job that wasn’t paying a lot. Now I’m working making better money but I don’t have a lot of money left after paying my bankruptcy payment.

Can I file a Ch.7 bankruptcy and just give the house and car back while in a Ch.13? I filed a Ch.13 to save my house and car for my children’s comfortability. I feel that keeping the house and car is not worth it and I’m still drowning trying to provide food on the table. I feel that I can let it all go rent a house similar to mine in the exact neighborhood and purchase a cheap vehicle for a year or two. Is that the wrong way to approach it?

Sasha”

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The Answer

Dear Sasha,

I don’t think it’s the wrong approach at all. In fact I think you’ve come to realize the life toil trying to hang onto stuff you can’t afford actually costs.

The desire to try and keep your grip on the home and car is robbing you of a less stressful life.

If you liked your bankruptcy attorney, you should talk to them about a strategy to do this.

Probably what they will suggest is to withdraw from the chapter 13 bankruptcy, default on the mortgage and car payments, either voluntarily had the car back or wait for it to be repossessed, and once they foreclose, file a chapter 7 bankruptcy to wrap up all the debt.

Update February 1, 2013

You actually would only need to convert the case and any resulting deficiency, I am told, would be terminated by the discharge.

The importance of having a plan to do this is to make sure that any liabilities from the home and car are included and discharged in your bankruptcy.

If you didn’t like your previous bankruptcy attorney, you can click here to find a local bankruptcy attorney you do like.

And don’t worry about rebuilding your credit after all of this. It’s really quite easy to do. See How to Easily Rebuild Your Credit and Have Good Credit Again.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

I Want to Give My House and Car Back and File a Chapter 7 Bankruptcy? Sasha
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I Want to Give My House and Car Back and File a Chapter 7 Bankruptcy? Sasha
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  • http://www.armstrongattorneys.com/ Gary Armstrong

    I agree with Steve’s general answer, but the specifics of the Chapter 7 process are something you should take up with an attorney. In general, if you convert from 13 to 7 all of the debts you had prior to filing the 13, plus any debts you incurred during the 13, are all discharged when you convert to 7 and it may be to your advantage to convert rather than to dismiss the 13 and re-file a 7. Further, any assets you acquired during the 13 are yours to keep, whereas if you dismiss the 13 and re-file a 7, any property you acquired after filing the 13 would become part of the newly filed 7. So, there are good reasons to just convert. Talk to your attorney.

    • http://GetOutOfDebt.org Steve Rhode

      Thanks Gary,

      If she converts to a 7 would it then be able to include any deficiency from a foreclosure and deficiency post-7 discharge or car sale deficiency from the auction sale?

  • Kim Coleman

    Hi Sasha, Depending upon your situation and timing issues, you may be able to convert your Ch 13 to a Ch 7 proceeding also, thus possibly saving you some costs and fees and headache. Like Steve said, it really depends upon your particular situation what the best strategy would be – and a bankruptcy attorney should be able to give you the information to figure that out. Good luck!

    Kimberly Coleman
    Philadelphia, PA

    • http://GetOutOfDebt.org Steve Rhode

      Thanks Kim.

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