WHAT HAPPENS TO MY MORTGAGE AND CAR LOAN IN A CHAPTER 7 CASE?

The mortgage on your home, like the unpaid balance of your car loan, is a secured debt. In bankruptcy, the mortgage lender and the auto lender are referred to as “secured” creditors. Secured creditors hold collateral that may be taken in the event of a default, in the event you miss payments or fail to carry insurance.
In chapter 7 bankruptcy, if you want to keep your home or your car, you must continue to make payments according to the contract. Also, you must abide by other provisions of the contract, like maintaining insurance and providing the lender with proof of insurance.
After the filing of a chapter 7 bankruptcy, but before a discharge order, if you are in default, the lender will apply to the bankruptcy court for “relief from the automatic stay.” If you are in default, the court will grant the request and issue an order relieving the lender from the injunction of the court order that stopped all collection activity (the automatic stay).
A chapter 7 bankruptcy discharge eliminates your personal obligation on the home loan and car loan. After discharge, if you default in your obligations, the lender’s only means of getting paid is to repossess the collateral and sell it. If it’s a home, the process is called foreclosure. If, after sale, the full debt is not paid, the lender may not pursue you for the balance.