This article is written by Peters and Associates.
This week’s question was asked as a follow-up to the “Answering Your Bankruptcy Questions” article we published in February. It’s a question I hear often in my daily practice because many Nevada residents want to keep certain property in their bankruptcy. The short answer? In most cases, yes.
Typically, if you file a Chapter 13 bankruptcy, you’re going to pay back a portion of your debt in the form of “plan payments” over the course of three to five years. As long as you make those plan payments and stay current on any payments for your house and car, you’re able to keep your property. If you’re behind on your car or mortgage payments, “catch up” payments often can be included in your Chapter 13 plan so you don’t lose your property.
There’s a slightly different set of rules that apply when you file a Chapter 7 bankruptcy. A Chapter 7 Trustee may take away property you own that’s not exempt from collection. Fortunately for Nevadans, our state’s laws — most of which are contained in NRS 21.090 — offer pretty generous exemptions when you file bankruptcy.
Specifically relating to a car, you’re allowed to keep “one vehicle if the judgment debtor’s equity does not exceed $15,000.” That means as long as your car’s equity — the difference between what you owe on the car note and what the car is worth — is less than $15,000 and you stay current on your payments, you generally can keep the car. Additionally, you may be able to keep any vehicles that have negative equity, but check with your attorney.
For houses, the rules are similar. You can keep your owner-occupied home as long as your equity in it doesn’t exceed $550,000 and you have filed the proper homestead declaration paperwork on the property. Certain time restrictions may apply.
There also are several other bankruptcy exemptions that apply in Nevada for items such as guns, works of art, jewelry, farm equipment, electronics, etc. There’s even an exemption for up to $500,000 of MONEY if it’s part of a retirement account — which is why you should never tap a 401(k), pension or IRA account to pay debt before speaking with an attorney.
In summary, in most cases, bankruptcy filers can keep everything they own. Your attorney’s most important job is to build a debt relief plan that works for you and protects as many of your belongings as possible.
Please note: The information in this column is intended for general purposes only and is not to be considered legal or professional advice of any kind. You should seek advice that is specific to your problem before taking or refraining from any action and should not rely on the information in this column.