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Filing for bankruptcy is never an easy decision. But for individuals struggling with debt, it can provide a much-needed financial reset. A common question many people have before filing is whether they can keep their house and car after bankruptcy. Several key factors will influence the outcome, including the type of bankruptcy you choose and the amount of equity you have in your home and vehicle. But in most cases, you can claim exemptions that allow you to keep your home and vehicle.
The purpose of bankruptcy is to allow individuals to move forward with a financial clean slate. Under federal and Wisconsin bankruptcy laws, most individuals filing for bankruptcy can use exemptions to protect their home and personal vehicles. Before determining which exemptions apply, you must decide whether you will seek protection under federal or Wisconsin bankruptcy laws. While bankruptcy in Wisconsin is governed by federal law, understanding state bankruptcy laws is essential, as Wisconsin bankruptcy laws often determine what property you can keep after filing for bankruptcy.
Bankruptcy exemptions allow individuals filing for bankruptcy to keep certain essential assets, such as their home and personal vehicles, up to specified value limits. Wisconsin and federal bankruptcy exemption laws each offer distinct benefits and drawbacks. The Wisconsin bankruptcy attorneys at Muter Law Office can evaluate your situation to help you decide which exemption laws will be most beneficial for you.
Under the Wisconsin Homestead Exemption, individuals filing for bankruptcy can protect the equity in their home. The exemption only applies to your primary residence, which includes single-dwelling homes, condominiums, mobile homes, and co-ops. The amount of the Homeowner’s Exemption you are eligible to claim depends on your marital status. Single individuals can claim up to $75,000, while married couples can claim up to $150,000. These exemption amounts exceed the federal exemption limit.
The Homestead Exemption also allows you to protect up to 40 acres of the land around your home. This exemption applies even if you sell your home. Your only obligation is to purchase another home within two years using the proceeds from the sale.
Wisconsin’s Motor Vehicle Exemptions law extends bankruptcy protections to your personal vehicle. You can claim up to $4,000 under the Motor Vehicle Exemption. This is the same as the federal limit.
Bankruptcy exemptions generally apply regardless of whether you file for bankruptcy under Chapter 7 or Chapter 13. However, there are important differences in how nonexempt property is treated depending on which type of bankruptcy you choose. During your consultation, our bankruptcy attorneys can explain these differences and how they apply in your situation.
Chapter 7 bankruptcy, known as “liquidation bankruptcy,” eliminates most unsecured debts, such as credit card and medical bills. It is generally a fast and affordable process and is often the preferred choice for filers. If your home equity falls within Wisconsin’s Homestead Exemption, you can usually keep your home as long as you continue making mortgage payments. However, if you are behind on your mortgage and are unable to catch up, Chapter 7 bankruptcy may not stop foreclosure.
If you are behind on your mortgage, our attorneys may be able to negotiate a “mortgage workout” with the lender that might involve refinancing or a loan modification. This should be completed before filing, as filing for bankruptcy can disrupt loan negotiations. If you are unable to catch up on your mortgage, you might consider filing for Chapter 13 bankruptcy.
In Chapter 13 bankruptcy, you can prevent or delay foreclosure while repaying overdue mortgage debt. This option is ideal for individuals who need time to catch up on mortgage payments and wish to keep their homes for the long term. To be eligible for Chapter 13 bankruptcy, you must have enough income to cover your current mortgage, essential expenses, and past-due payments. If you complete the repayment plan, you can avoid foreclosure and keep your home.
Through the strategic use of bankruptcy exemptions, you can protect your home and personal vehicles. The experienced bankruptcy attorneys at Muter Law Office can evaluate your situation, explain the benefits and drawbacks of filing for bankruptcy under Chapter 7 versus Chapter 13, and advise you on the best way to move forward. We can also help you navigate other essential bankruptcy protections like reaffirming secured debts or restructuring payments. We will ensure you understand your options and help you avoid costly mistakes.
Muter Law Office offers practical, cost-effective solutions to help debtors struggling with debt. Contact the Muter Law Office today to schedule a free and confidential appointment to discuss your situation and how we can assist you.
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