Property to Keep or Not
to Keep!
I
get asked all the time what assets or property you can keep
if you file a bankruptcy. The first thing I am going to
look at is what kind of lien you have on that property. The
most common lien I am questioned about is purchase money
security interests. A purchase money security interest is
when you get a loan for that specific property. For
example, going to Best Buy and buying a computer on store
credit, or buying jewelry or financing a car. Basically
most Americans at one time or another have had a purchase
money security interest in property at one time or another.
So let’s get to the point of whether or not you can stop
making the payments and keep the specific property.
Your answer for the most part will unfortunately be no in
this instance. When you bought the item you gave the store
a security interest in that property, and you stipulated
that if you did not honor your contract and pay the item
off, it would be subject to repossession. In a Chapter 13
you can keep the property and continue paying it in your 3
to 5 year plan. In a chapter 7 you would either come up
with the money for the item or surrender it. Remember the
information above would not apply if you bought the
property on a general purpose Visa or MasterCard. Visa or
MasterCard could not take your jewelry or television away
because they don’t have a security interest in the specific
property because you bought it with a general purpose
credit card. You can still be sued for what you owe but you
couldn’t be forced to sell the merchandise to cover the
debt. If you are past the presumption of fraud period you
could probably end up discharging the debt and keeping the
property (see our credit card fraud topic). I will be
discussing property you can discharge in our property you
can keep section.