Are you afraid to file for bankruptcy because you don’t want to lose all of your possessions? We’ve all seen television shows and movies where the person is left sitting in an empty house with all of the possessions, including their car, being repossessed after filing for bankruptcy.
Well, guess what? Hollywood isn’t always right.
In fact, in most cases, the majority (if not all) of your assets are protected.
Assets in Chapter 7
Chapter 7 – also known as liquidation bankruptcy – can require filers to sell off some assets to pay their creditors. However, this doesn’t necessarily mean you MUST sell your property.
Asset vs. No-Asset Cases
If you file for Chapter 7 bankruptcy case and you do not have any assets above a certain value in certain broad categories of property, then it is labeled a no-asset case, meaning all of your property is ‘exempt’ from sale by the court. This is the result in the vast majority of Chapter 7 bankruptcy cases. If you do have assets above a certain value if certain categories that the court deems valuable enough that the court believes there will be a ‘meaningful distribution’ to your creditors, it is called an asset case.
No-asset case: In a no-asset case, it means all of your assets are either marked exempt or do not have any equity. If you do own a home or a car, and you owe more on the loan than it is worth, you don’t have equity and the court doesn’t consider it to have value. Your case might fall under this category, as no-asset cases are the majority of Chapter 7 cases. Most of my clients are surprised by how much value in property they are allowed to keep during a bankruptcy.
Asset case: If you do have assets that cannot be marked as exempt, or that do have equity, then you may have an asset case. In this type of case, you might be asked to sell the property to pay your creditors – but that doesn’t always happen. Your bankruptcy attorney can negotiate to try to pay the value of the asset over time or to pay a lower amount. It’s important to note, though, that your attorney can also work with you to mark most of your assets exempt.
Disclose Your Assets
When filing for bankruptcy, you must disclose all of your assets to your bankruptcy attorney. Even if you’re afraid of losing property and think hiding it is the best option – it’s not. Be honest with your lawyer and let them fight for you to keep your assets.
Failure to submit a complete list of your property to the court can result in big consequences – including criminal fines and jail time. You submit this information under penalty of perjury.
If you are worried about losing assets by filing for Chapter 7, it’s essential to talk to your bankruptcy attorney. After reviewing your property and your debt, your attorney will be able to help you determine what will be marked exempt before you file for bankruptcy.
If your attorney prepares you that you will likely lose some assets during the bankruptcy proceedings, they will also help you weigh the pros and cons of keeping the asset versus filing for bankruptcy. In most cases, having to sell the property and being able to discharge your debts can outweigh the risks of staying in debt and not filing.
Assets in Chapter 13
In Chapter 13 bankruptcy, instead of selling off assets to pay creditors, you establish a repayment plan. Because of this, you have very little risk of losing any property – as long as you make the monthly payments outlined in your repayment plan.
This isn’t as easy as it sounds, as your repayment plan can last for 3 to 5 years.
What can be in jeopardy under Chapter 13 are gifts and additional income. Your repayment plan is factored into how much income you have – and how much disposable income you have. If you receive an inheritance, bonus, or wage increase during your bankruptcy, you will have to give that money over to the court to put towards your debts.
Let Us Help You
If you are worried about losing your assets through bankruptcy, ask our experts. Let our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. review your case and determine what the best course of action is for you to retain your assets. We work for you, the people, and not institutions. Contact us for a free case evaluation, or no-obligation consultation. We are dedicated to helping you overcome this small bump in the road and assisting you to get on with your life.