Dealing with the possibility of bankruptcy or actually going through the process can be an extremely overwhelming situation for anyone. It’s not uncommon for people to feel lost, anxious, stressed, and ashamed of their financial situation. One of the most significant concerns clients have is whether or not they will lose their assets if they file for bankruptcy. The answer is no, in almost all cases.

All U.S. states have crafted specific exemptions designed to protect the essentials, allowing people to maintain a semblance of normalcy and security as they work through their financial recovery.

Bankruptcy often carries a stigma of financial defeat, but in reality, it is a legal tool designed to provide relief and a pathway to a fresh start for those overwhelmed by debt. Most people file for bankruptcy due to job loss, failed business, medical debt, or divorce. Whatever the reason, our team of bankruptcy attorneys can help you navigate through this process and make sure that your assets are protected.

At OlsenDaines, we understand how important it is for our clients to not only receive relief from their overwhelming debt but also to protect their hard-earned assets. That’s why we are here to assist you in navigating the complexities of how to protect your assets during bankruptcy. We are here to make sure that you keep the assets you value the most.

In this guide, we’ll discuss both Chapter 7 and Chapter 13 bankruptcy filings and strategies that protect your assets while relieving your financial burdens.

Which assets are protected in bankruptcy?

Chapter 7 bankruptcy provides a way to discharge most of your unsecured debts, and it also allows you to keep key assets. These exemptions available under Federal, Oregon, and Washington State laws play a critical role in allowing individuals to reset their financial lives without losing everything they have worked hard to acquire:

Homestead Exemption: One of the most significant protections, this exemption allows individuals to protect substantial equity in their homes. States the exemption amount periodically, but it’s designed to keep you in your home without the threat of forced sale under bankruptcy proceedings.
Vehicle Exemption: Essential for personal transportation to and from work, this exemption protects a portion of your vehicle’s equity.
Retirement and Pension Accounts: These are fully protected under both state and federal laws.
Personal Property: This category covers a broad array of items, from household goods and furnishings to personal clothing and some types of jewelry, each up to a specified value.

Unlike Chapter 7, Chapter 13 bankruptcy doesn’t involve liquidating your assets but rather restructuring your debts.

Under Chapter 13:

You keep all your assets while making more manageable monthly payments toward your debt based on a court-approved repayment plan.
You consolidate your debts and possibly reduce interest rates or eliminate certain penalties.
You can halt the foreclosure process and be given time to catch up on missed mortgage payments through your repayment plan.

Property Listing and Exemptions

As part of the bankruptcy process, you must list all of your property, both real and personal. This includes your home, vehicles, retirement accounts, and household goods and belongings.

But there’s no need to worry – there are specific exemptions under state or federal law that protect your property throughout the bankruptcy process. We at OlsenDaines understand the nuances of federal bankruptcy law and will walk you through each step so that you understand how assets are protected and how a fresh start can help rebuild your life.

Can a trust protect assets in bankruptcy?

Generally, No. In fact, transferring an asset into a trust before a bankruptcy can deprive a person of any otherwise allowable exemption.

In some cases, a trust set up long before any financial trouble arises can protect assets from bankruptcy courts. It’s also important to note that the protective strength of a trust can be undermined if it appears to be set up explicitly to avoid creditors.

Trusts created shortly before filing for bankruptcy, or those that transfer substantial assets, may be scrutinized or even dissolved under fraudulent transfer laws. Honest and timely planning is key to utilizing trusts effectively for asset protection.

What To Expect When You’re Behind On Payments

The first thing you need to know is that when you’re behind on your mortgage or car payments, creditors have the legal right to take possession of the asset and sell it to recoup the money you owe. Foreclosure or repossession of assets can obviously be a nightmare scenario, especially when it comes to your home. The good news is that bankruptcy can stop this process, at least temporarily.

What to Do When You’re Behind on Mortgage and Car Payments

Luckily, you have options. Filing for bankruptcy can be a great solution for protecting your assets and giving you the breathing room you need to get back on your feet.

Knowing how to protect your assets can be difficult, but an experienced attorney can help. It’s never a great feeling when you’re falling behind on your mortgage or car payments. You start to feel like you’ll never catch up or get back on track. It can be an incredibly stressful situation, especially if you’re relying on that car to get to work or don’t want to lose your home.

Can I file Chapter 7 and keep my house?

If you are current on home payments and you are within the homestead allowance, you can keep the home. The homestead allowance (exemption) changes each year, so please check with an attorney to see if your home is protected.

Filing a Chapter 7 bankruptcy can temporarily stop the sale of your home (because of the “automatic stay”), but that does not mean it will ultimately save your home from foreclosure.

Foreclosure laws differ from state to state and are very complicated. If you are facing foreclosure, it’s important that you understand at least some of the basics, including the difference between a judicial foreclosure and a nonjudicial foreclosure, and:

How much time you have to respond to notices.
What your rights are and what laws protect you in foreclosure.
What happens afterwards (for example, whether you’ll be liable for a deficiency judgment).

While a Chapter 7 will give you the benefit of the automatic stay, bringing the foreclosure to a halt until discharge or the stay is lifted, unlike a Chapter 13 bankruptcy, it will not allow you to catch up on missed mortgage payments. That’s because Chapter 7 is a liquidation bankruptcy designed to discharge (wipe out) unsecured personal debts (e.g., credit card debt and medical bills).

If you are behind in your mortgage payments, your lender can foreclose on your property. The lender can continue a foreclosure that was delayed by your bankruptcy once you are discharged or a relief from the automatic stay (“relief from stay”) is granted. The same applies to other liens on the property, like HOA or condominium liens. No deficiency.

Whether a Chapter 7 is the right option for you is something that you should discuss with a bankruptcy attorney. Here at OlsenDaines, our bankruptcy attorneys know the options and care about the outcome. That’s why OlsenDaines offers bankruptcy consultations, so we can sit down with you and help you decide what is the best approach for you and your family.

Can an HOA foreclose on a home after bankruptcy?

An HOA may be able to foreclose on your property depending on your specific situation, even if you are granted a bankruptcy discharge. Here are some instances where an HOA can foreclose on your property after bankruptcy:

Your foreclosure has already taken place. Bankruptcy cannot undo a foreclosure that has already taken place. So, if the HOA has already foreclosed on your property and the home is no longer in your name, the outcome of your bankruptcy petition will not be able to reverse the process.
The HOA filed a lien against your property. Once an HOA files a lien against your property, it may begin the foreclosure process. Though you are granted an “automatic stay” while filing for bankruptcy (meaning that the HOA cannot move forward with the foreclosure process during your petition), they may be able to resume the process once you are granted discharge. Bankruptcy cannot get rid of a lien filed against you, even if your debts are discharged, so your property may still be foreclosed on.
You accrue more fees after bankruptcy. Bankruptcy will only discharge debts accrued prior to your petition, so you will be responsible for any fees due after you are granted bankruptcy. This is true even if you are forfeiting the property; you will have to pay any fees that accumulate between the time you are granted bankruptcy and the sale of your home. To avoid accruing more fees and debt, it is best to wait until the property is sold before filing for bankruptcy if you are planning to surrender the home.

Can I discharge my HOA debt through bankruptcy?

Your specific circumstances will impact whether or not you can dismiss HOA debt by filing for bankruptcy. To determine if your HOA fees can be discharged, begin by asking yourself these questions:

Which chapter of bankruptcy am I filing for? In a Chapter 13, you will pay the past-due HoA dues over time through the court. Chapter 7 will not have a formal repayment plan so you will need to take care of HOA dues separate from the bankruptcy.
Do I plan to keep the property? If you are not going to keep your property, you will need to discuss timing considerations with an attorney to determine the best time to file the bankruptcy.

With Chapter 7 bankruptcy, you should treat the HOA like a bank holding a mortgage and plan to make payments both before and after you file. It’s important to know that the HOA could still foreclose on your home if they have a lien on your property, even if your debts are discharged.

Meanwhile, if you are filing for Chapter 13 bankruptcy and plan to keep the property, your repayment options may look a little different. Since this chapter allows you to reconfigure your debts into a payment plan, your past HOA fees should be included in your monthly installment.

How Filing for Bankruptcy Can Help You Protect Your Assets

When you file for bankruptcy, creditors are required by law to halt any foreclosure or repossession proceedings. This break in collection efforts can give you the time you need to catch up on payments and get back on track. Of course, filing for bankruptcy isn’t a magic wand that will make all your debts disappear. However, it does give you more options when it comes to paying back what you owe.

When you file for Chapter 13 bankruptcy, for example, you can create a payment plan to pay back debts over a period of three to five years. The payment plan can include the arrears on your mortgage or car loan, which you can pay back in smaller, more manageable installments. A plan with smaller payments can be a huge relief for those who are struggling to make the full payments all at once.

One thing to keep in mind is that bankruptcy can have an impact on your credit score. This is something that will need to be weighed against the benefits of getting back on track with your payments.

That being said, if you’re already behind on payments, your credit score has likely already taking a hit, and bankruptcy can actually help you start to rebuild your credit over time. It’s not a decision to be taken lightly, but it can be a very viable solution for those who are struggling to keep up with debt.

How do I know if you’re eligible to file for bankruptcy?

An important note for those who are considering bankruptcy is that there are certain requirements you’ll need to meet to be eligible.

For example, to file for Chapter 13 bankruptcy, you’ll need to have a reliable source of income to make the payments on your repayment plan. You’ll also need to meet certain debt limits. Working with a bankruptcy attorney can help you understand your options and whether bankruptcy is the right choice for you in protecting your assets.

How can I stop creditor harassment?

Another frequently asked question is whether bankruptcy will stop creditors from harassing and suing. The answer is Yes. Once you file for bankruptcy, creditors are immediately notified through the federal court system and must immediately stop harassment, lawsuits, and any other form of collection of debts. We understand that the constant harassment can be troubling, and protecting our clients from continued harassment is a top priority for us.

Can I rebuild my credit after bankruptcy?

Another question we commonly receive is whether or not filing for bankruptcy will affect future credit. While it is true that bankruptcy does affect credit scores, there are strategies we can use to mitigate any harm that may negatively impact your credit record. We can help you rebuild your credit score after bankruptcy and get back on track to a healthy financial future.

How We’ve Helped Clients Protect Their Assets

When facing the daunting task of being several months behind on mortgage payments due to medical debt and a medical leave of absence, clients named Steven and Gloria were fortunate enough to have federal bankruptcy laws on their side.

By working with OlsenDaines, their home was saved, and they were able to pay back the amount they owed over a five-year period. This payment plan allowed them to stay in their home, raising their three minor children in a stable environment. And by retaining the services of OlsenDaines, all creditors were referred to the firm, and the federal bankruptcy petition was prepared accurately and thoroughly.

With the guidance of an attorney, clients can rest assured that their matters will be handled carefully and with their best interests in mind.

Your Oregon & Washington State Bankruptcy Experts

By filing for bankruptcy, you can protect your assets, create a payment plan to catch up on debts, and even start to rebuild your credit over time. It can be a very effective way to get back on track and give yourself a fresh start. The legal process of filing for bankruptcy and protecting your assets can be confusing and overwhelming, but it doesn’t have to be.

At OlsenDaines, our experienced bankruptcy attorneys can help. We will provide you with the guidance you need to protect your assets and navigate through the process of filing for bankruptcy. With over 33 years of experience serving people throughout Oregon and Washington State, we are very familiar with local bankruptcy laws and are prepared to help you regain control over your finances so you can truly start fresh.

If you are looking into bankruptcy and would like to speak with an expert, contact us today to set up a free legal consultation!

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