Nolo’s Bankruptcy & Foreclosure Blog

People often ask me about how Chapter 7 bankruptcy will affect their ability to keep their car. If you aren't making payments on a car, then it's just a matter of using whatever exemptions are available to keep it, just like any other asset. However, if you are making payments on your car, it's not so simple. As part of your bankruptcy you must decide how you want handle the note. You do this by filing an official form called the Statement of Intention (SOI) with your other bankruptcy papers as well as mailing a separate copy of the SOI to your lender.

For the full text of this article, head over to Nolo's Online Legal Encyclopedia.

Sometime this week, the House is expected to vote on H.R. 1106, the bill that would allow Chapter 13 bankruptcy judges to modify residential mortgages. Right now, judges cannot modify mortgages attached to the bankruptcy filer's principal residence.

Without question, an enormous number of homeowners facing foreclosure would be able to keep their homes now and in the future if the principal owed on their mortgage could be crammed down to the home's current market value in a Chapter 13 bankruptcy (and the interest rate reduced to the bare minimum). Not only would foreclosures be avoided, but Chapter 13 itself would become much more available as a remedy, since many Chapter 13 plans fail because of the non-affordability of the filer's mortgage payments.

Previously, I've argued that Chapter 7 judges should also be allowed to modify mortgages, since so many more people file Chapter 7 than Chapter 13. However, half a loaf is better than none, and allowing Chapter 13 judges to bring mortgages into line with the value of the home would not only benefit the filer but would also provide a powerful brake on the deterioration of the residential real estate market.

You can lobby your representative by calling 1-877-354-4958 between 9AM and 6PM Eastern Standard Time only. You will be given specific suggestions for the substance of your phone conversation and prompted to enter your zip code, but the basic idea is that you favor passage of the bill.

Depending on your Congressional district, your call will be routed to the office of your Senator, your House Rep, or the White House.