Filing for Bankruptcy: Will It Cost You Your House or Vehicle?

When overwhelming debt makes bankruptcy seem like the only option, the primary concern for many is losing their home or car. It’s a valid fear, especially when your vehicle is essential for work and you don’t want to uproot your family at any cost.

At Swindell & Associates, PC, we assist clients with personal bankruptcy, debt relief, foreclosure defense, and related financial challenges. When you're ready to take control of your financial future, we're prepared to provide guidance and support every step of the way. Our firm serves clients in the entire Texas panhandle, including Amarillo, Canyon, Borger, Pampa, Hereford, and Dumas. 

Types of Bankruptcy That Affect Property

The type of bankruptcy you file plays a significant role in how your property is treated. Most individuals file under either Chapter 7 or Chapter 13 of the Bankruptcy Code. Each type handles property and debt differently.

Chapter 7 bankruptcy involves liquidating nonexempt property to repay creditors. In some cases, this might include selling assets that don’t fall under exemption protections.

Chapter 13, on the other hand, sets up a repayment plan over several years. This plan can help you catch up on past-due payments while retaining certain assets, such as a house or car.

We always start by determining which chapter best suits your financial situation. Then, we look over your property and see how it may be treated.

How Property Exemptions Work in Texas

Texas has some of the most generous bankruptcy exemptions in the country. These laws protect certain assets from being sold to repay creditors. The key is whether your home and vehicle fall within the value limits set by state law.

The Texas homestead exemption is one of the strongest in the country. It generally allows you to keep your primary residence, regardless of its value, as long as it sits on 10 acres or less in a city or 100 acres or less in a rural area. This means many homeowners can keep their property during bankruptcy.

Texas also allows you to exempt one vehicle per licensed household member. That means if you and your spouse both have licenses, each of you can protect one car. The value of the vehicles doesn’t affect this exemption, though equity in the vehicles may matter depending on the chapter filed.

If your property fits within these limits, there’s a good chance you’ll keep it through the bankruptcy process.

What Happens to Your Home in Chapter 7 Bankruptcy

In Chapter 7, the court assigns a trustee to review your nonexempt property. If your home qualifies under the Texas homestead exemption, it’s protected from sale. However, the exemption only protects equity, not the mortgage.

If you’re behind on mortgage payments and can’t catch up, the lender may still proceed with foreclosure. Bankruptcy can temporarily stop the foreclosure process through the automatic stay, but it doesn’t erase your mortgage debt. If the lender doesn’t receive payment, they may still foreclose once the stay is lifted.

Here’s what can influence whether you keep your home:

• You're current on your mortgage payments

• You can continue making payments after filing

If you meet these conditions, Chapter 7 may allow you to keep your house. If not, we may consider whether Chapter 13 is more appropriate.

What Happens to Your Vehicle in Chapter 7 Bankruptcy

Cars often fall within the Texas vehicle exemption, but the outcome depends on how much equity you have and whether you're still making loan payments.

If your car is paid off and its value doesn’t exceed the exemption, it’s likely protected. If you're still making payments, the lender may allow you to keep the car as long as you continue paying. This is called reaffirming the debt. You’ll sign an agreement stating that you’ll remain liable for the loan after bankruptcy.

However, if you're behind on payments or the equity exceeds the exemption, the trustee may consider selling the vehicle. In that case, you might have the option to pay the trustee the nonexempt portion or surrender the vehicle. But, these exemption issues will be explained to you by our attorneys prior to filing your case.

Chapter 13 and Property Retention

Chapter 13 operates differently. Instead of selling property, you make monthly payments based on your income and debts. This repayment plan typically lasts three to five years and gives you more flexibility to catch up on missed payments.

This type of bankruptcy may be a better option if:

• You're behind on your mortgage or car payments

• You want to avoid foreclosure or repossession

• You have valuable property that wouldn’t be exempt in Chapter 7

Chapter 13 allows you to repay arrears over time and keep your property, provided you stay current on your plan payments and future obligations. It’s particularly useful for those who have a regular income but need time to stabilize.

Common Concerns About Property Loss

We often hear questions like, “Will I wake up one day and my car is gone?” or “Will I be forced to move immediately?” These fears come from uncertainty about how bankruptcy works.

Here’s what usually helps ease those concerns:

• Bankruptcy doesn’t mean you lose everything

• Property exemptions under Texas law are designed to protect homes and vehicles in most cases

• You’ll know what’s protected before filing

Property isn’t taken without notice. If an asset isn’t protected, the trustee will inform you, and you’ll have a chance to respond or explore alternatives.

Alternatives If Property Isn’t Fully Protected

If your house or vehicle isn’t fully exempt and you want to keep it, Swindell & Associates, PC, considers other strategies. Chapter 13 may be one route. In some cases, redemption or buying back the asset from the trustee is explored. 

Depending on the situation, some people choose to surrender the property, which can eliminate loan obligations and provide a fresh start. Others use nonexempt assets to pay off debts or adjust their repayment plan in Chapter 13. The goal is to review all available options before deciding what to keep or give up.

Planning Before You File Matters

One of the best ways to protect your home and car during bankruptcy is to plan carefully before filing. That means reviewing your property, understanding your equity, and determining your payment status on secured loans.

We also consider whether you’ve recently transferred property or taken out new loans. These actions can affect how the court views your case and what assets are available to creditors.

We work with clients to organize financial records, list assets and debts clearly, and identify any areas that could pose risks to important property. This upfront planning helps you move forward with more confidence.

Factors That Can Affect Property Retention

A few other factors can influence whether you keep your property:

• Equity: The more equity you have, the more important it is to evaluate exemptions carefully.

• Loan terms: High-interest rates or missed payments can complicate asset retention.

• Recent appraisals: The current value of your home or vehicle affects how much is considered exempt.

• Other nonexempt property: If you own additional nonexempt assets, those may be used before a trustee looks at exempt property.

Each case depends on the details. That’s why we focus on reviewing the specifics of your situation before you file.

How the Automatic Stay Affects Your Property

When you file for bankruptcy, the court issues an automatic stay. This order prevents creditors from collecting debts, foreclosing on homes, or repossessing vehicles—at least temporarily.

While the automatic stay doesn’t erase debts, it buys you time. If you’re facing foreclosure or repossession, this pause can allow us to develop a plan. For those filing Chapter 13, the stay provides a window to propose a repayment strategy.

Keep in mind, though, that creditors can request the stay be lifted. If they succeed, they may proceed with collection actions. That’s why it’s important to act quickly and communicate any payment intentions.

Bankruptcy Can Offer a Path Forward

Although bankruptcy may feel like a last resort, it’s a tool that can help preserve what matters most. In many cases, it doesn’t mean giving up your home or car. Instead, it’s a chance to reset your financial picture while keeping critical property in place.

Texas exemptions are favorable for many families, and bankruptcy laws are designed to balance creditor interests with your right to retain a foundation for rebuilding. Whether it’s Chapter 7 or Chapter 13, we focus on protecting your most important assets and creating a plan that makes sense for your life.

Before filing, we evaluate:

• The equity in your home and vehicles

• Whether you're current on secured debts

• How exemptions apply to your situation

• Which chapter aligns with your goals

With this information, we can offer guidance on what to expect and how to prepare for each step.

Contact Us Today

Bankruptcy doesn't have to mean losing everything. At Swindell & Associates, PC, we help clients across the Texas Panhandle, including Amarillo, Borger, Pampa, Hereford, and Dumas, understand their options. When you're ready for clear guidance, call our office to schedule a confidential consultation.