Will I be able to keep my assets if I file bankruptcy?
If you are considering filing bankruptcy one of your main concerns may be whether or not you will be allowed to keep your property. The good news is in many cases if you choose to file Chapter 7 bankruptcy much of your property may be protected by bankruptcy exemption laws. The amount and types of property you can keep, however, will depend on where you live.
Chapter 7 bankruptcy exemptions and assets
If you choose to file Chapter 7 bankruptcy a trustee is appointed to your case and given the authority to sell many of your assets and use the proceeds from the sale to repay your creditors in priority order as determined by bankruptcy law. The good news, however, is that bankruptcy laws will protect some of your assets and identify them as exempt.
The goal of exemptions is to allow debtors to keep a certain amount of their property so they can make a fresh start after the bankruptcy. If your asset is considered exempt, the trustee will not be able to confiscate it and sell it to generate funds.
What property is exempt in bankruptcy?
Exemptions are determined by both federal and state laws. For instance, some states have created their own list of exemptions which must be used by bankruptcy filers. Other states allow debtors to choose either the state exemption list or the federal exemption list.
If you decide to use the federal exemption list you will be able to exempt a certain amount of equity for personal property and for your home. Some states will also allow an unlimited homestead exemption to protect your house from bankruptcy.
How do exemptions work? Let's look at an example. If you file for bankruptcy and you have a car which is worth $4,000 and your state's exemption for cars is $6,000 than you will be able to keep your car.
But if, for instance, you have a car which is worth $15,000 and the exemption is only $6,000, the trustee may be able to sell the car, repay your car loan, pay you the amount of the exemption, and if there is excess money, it can be used to repay your unsecured creditors.
In some cases, however, if the value of the property is just a little more than the exemption the trustee may decide the costs of selling the property is not worth the trouble and you will be able to keep the property.
Some states will also have what is called a wildcard exemption. This exemption can be used to save any piece of property. So, for instance, if you live in a state with a low car exemption but a $6,000 wildcard exemption, it may be possible to combine the car and wildcard exemption to save your car.
Chapter 13 and my property
In Chapter 13 bankruptcy property is not liquidated for repayment. So if you choose to file Chapter 13 bankruptcy the court will not be concerned with exempting your property, but will, instead, allow you to create a 3 or 5 year debt repayment plan to repay your creditors.
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Category: Estate Law