Keeping Property and Other Assets During Bankruptcy
Much of your property and your assets, things like a vacation home, second vehicle, collections, antique cars, boat, computers, pictures, and other things of value cease being yours once you file for bankruptcy. Instead, much of your property and assets belong to the bankruptcy estate which is managed by the bankruptcy trustee. The trustee’s role is to liquidate any property not considered exempt or excluded and use the proceeds to satisfy your creditors.
Some people mistakenly think they’ll be left with nothing once they file for bankruptcy, but that’s not true. Laws regarding property exclusion and exemption vary widely from state to state and the only way you’ll know for sure what’s exempt and what’s not is to refer to your state’s bankruptcy laws. But these laws are complex. Therefore the best way to protect yourself is by hiring a lawyer with experience in bankruptcy laws. An experienced lawyer will review your asset list and your current financial situation and help determine, based the different exemption schedules, what property you likely will be allowed to keep.
Some states allow you to keep things like clothing, jewelry, retirement funds, pets, earnings, the tools needed to do your job, awards from personal injury cases, and life insurance policies that have not matured. If you want to keep as much as you can, you need to understand your rights.
For example, do your realize it’s possible to exempt as much as $100,000 worth of your home’s equity? It’s true and that’s why it’s so important to calculate equity properly and choose the most advantageous exemption schedule. Equity is a calculation of your home’s value minus the balance on your mortgage and the costs of closing. Most people determine value based on the best selling conditions when really, during bankruptcy, value should be based on a forced liquidation.
Disclaimer: The general information presented here relates to Chapter 7 consumer bankruptcy. This discussion is incomplete and does not involve consumer debt restructuring as defined under Chapter 13 bankruptcy; a different type of bankruptcy filing. The information presented is not meant as a legal opinion and should not be used as a substitute for legal advice. For detailed information regarding Chapter 7 consumer bankruptcy, refer to your state’s bankruptcy laws. For specific and complete information regarding how state bankruptcy laws affect your personal situation, it is advisable to seek independent legal representation.