2020 Best Invention

What Is Equity?

1 minute read Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool


In a Nutshell

Your equity in a house or car (the dollar value that belongs to you, not the lender) is the current value of the property minus the amount you still owe on it. When you file bankruptcy, exemptions protect the equity you have in certain assets.

Written by the Upsolve TeamLegally reviewed by Attorney Paige Hooper
Updated May 4, 2022


When you have a loan on a piece of property, you may hear the word “equity” every now and then. This is how much of the property’s dollar value belongs to you rather than the lienholder. To find how much equity you have, take the current value of a piece of property and subtract any outstanding loans you have on it.

Let’s walk through an example to illustrate: Say you own a home with a current market value of $200,000 and the balance on your (only) mortgage is $175,000. In this case, you have $25,000 of equity in your home, calculated as follows:

$200,000 (value of house) – $175,000 (balance left on mortgage) = $25,000 (your equity)

You can even have equity in your car, but this is less common since vehicles usually only decrease in value. Still, the calculation remains the same. If you own a car with a value of $7,000 and you owe $3,100 on the car loan, your equity is $3,900.

Upsolve User Experiences

600+ Members Online
Misa
Misa
★★★★★ 28 days ago
It was very easy. They guided me through everything.
Read more Google reviews ⇾
charles sullivan
Charles Sullivan
★★★★★ 1 month ago
I am very pleased with the services,and guidence that Upsolve give me
Read more Google reviews ⇾
Cheyenne Neeley
Cheyenne Neeley
★★★★★ 1 month ago
Amazing
Read more Google reviews ⇾

Why Does Equity Matter?

When you file bankruptcy,exemptions protect the equity you have in certainassets. That means your house or car can be 100% protected even though it’s worth a lot more than the available exemption, as long as your equity is less than the exemption amount.

Here are some examples to illustrate how this works:

Why Does Equity Matter?

If your house or car is worth less than what you owe on your mortgage or car loan, you don't have any equity and the trustee won’t be interested in the asset. In Chapter 7 bankruptcy, the trustee can sell your assets and use the sale proceeds to pay some of your debts. If there are any loans against the property that's sold, the trustee must use the sale proceeds to pay those off first. If you don't have any equity in the property — meaning nothing is left over after paying off the loan(s) — then it's not worth the trustee's time and expense to sell that property. The same is true if all or almost all of your equity in the property is protected by exemption laws.



Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Paige Hooper

LinkedIn

Paige Hooper is a seasoned consumer bankruptcy attorney with 15 years of experience successfully representing debtors in Chapter 7, Chapter 11 and Chapter 13 cases. Paige began practicing bankruptcy law in 2006 and started her own solo, multi-state bankruptcy practice in 2012. Gi... read more about Attorney Paige Hooper

It's easy to get help

Choose one of the options below to get assistance with your bankruptcy:

Free Web App

Take our screener to see if Upsolve is right for you.

Take Screener
9,521 families have filed with Upsolve! ☆
or

Private Attorney

Get a free bankruptcy evaluation from an independent law firm.

Find Attorney

Learning Center

Research and understand your options with our articles and guides.

Go to Learning Center →

Already an Upsolve user?

Read Support Articles →

News

    + Show Articles

    Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can’t access their basic rights when they can’t afford to pay for help. Combining direct services and advocacy, we’re fighting this injustice.

    To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.