In a Chapter 7, if you want to keep your home or car, you must be current on your mortgage and car payments. If your equity in the property is fully exempt, than you may keep your home or car so long as you continue to make the monthly payments required. For example, the exemption for home equity is $60,000. If you own a home worth $170,000 and you owe $110,000, you have $60,000 of equity in your property. In this case, you could file a Chapter 7 and keep your home as long as you are current on your payments and continue to make them on time.

In reality, equity is measured after accounting for the cost of sale (e.g., Realtors and fix up costs). So even if you could sell this house for $160,000, the equity will still be exempt ($160,000- about $16,000 in costs of sale = $144,000. After you pay the mortgage off, you would have only $34,000, which is exempt.) The exemption for equity in an automobile is $3,000. If your car is worth less than that, you are in good shape and can keep it. If your car is worth $20,000 and you owe $15,000, your equity is $5,000 and this is exempt. If your car is leased, you have no equity in it, so you may keep it so long as you are current on the payments. If you are not current on your home or car payments, or if you have too much equity, you may still be able to keep your car and home by filing a Chapter 13. On the other hand, if you wish to surrender your car or home, you may do so without being liable for any more money.