Will I Lose My Stuff in a Bankruptcy Case?
Many of the people who call our office say they want to avoid bankruptcy because they don’t want to lose their belongings. The reality is, in nearly all cases you won’t lose any assets in a bankruptcy filing.
In both of the two main consumer bankruptcy chapters, 13 and 7, you will need to disclose all of your assets, including assets you may not currently have but may have a legal right to. Then you get to protect these assets with available exemptions. There are different types of exemptions for different types of assets. For instance, there is a specific exemption for vehicles in bankruptcy, but the amount of the exemption is limited so you may also need to use the “wildcard” to fully cover the equity. The idea behind the exemptions, is that you get to receive the benefit of the discharge, but you can’t also walk away with a luxury or significantly valuable asset, that could have been used to pay your creditors.
In a Chapter 7 Case, if there is an asset that cannot be protected, the Chapter 7 Trustee can take that item away, liquidate or sell it, and then distribute funds to your creditors. However, as long as you fully discuss all of your assets with an attorney, you will know if there are any possible assets that could be taken in the bankruptcy before the case is even filed. And in most cases, all assets can be fully protected.
In a Chapter 13 case, if there are any assets that cannot be fully protected, you do not have to forfeit the property. However, the amount of the exposure will need to be paid to creditors in the Chapter 13 Plan. Chapter 13 bankruptcies always have a payment plan, where you pay monthly to the Chapter 13 Trustee over 36 to 60 months. The percentage of your debt that you pay to your creditors is determined by a few factors, including the amount the creditors would have received in a hypothetical chapter 7 case due to exposed assets. Here, the creditors cannot receive more money in the 13 than they would have received in a 7.
The other thing to keep in mind while in bankruptcy, is that any secured debts owed, such as a car loan or mortgage, will need to be paid on time every month after the case is filed. This is the case in both chapters, if you would like to keep the asset. Of course every case and circumstance is different, so always follow the advice of your attorney.
All of this may seem complicated, but this is why it’s best to hire an attorney to make sure everything is handled correctly. If you are considering a bankruptcy and have questions regarding your circumstances, reach out to us today to schedule a time to speak. Call us at 508-655-3013 or through our website at ravosalaw.com.