Friday, January 7, 2011

Bankruptcy and Property

One of the main questions I had when I filed bankruptcy was about bankruptcy and property. I was very concerned with what was going to happen to my property in bankruptcy.

Having gone through bankruptcy and having received a discharge, I now know the answer to this and it depends on which bankruptcy chapter you file. In a chapter 13, you are put on a payment plan (not to exceed five years) that you can afford, and you keep all of your property.

A chapter 7 bankruptcy is different. The premise is that it is a "liquidation" of assets. In theory, your assets are sold to pay your creditors what is possible and then you are free and clear (discharged) to go about your business.

Don't freak out probably have less "assets" than you think. Plus, you are allowed a certain amount of property exemptions...monetary amounts of stuff you can keep regardless.

The truth is that most people who qualify for chapter 7 don't have many (or any) assets to be liquidated. I didn't have to forfeit any property~ bankruptcy truly gave me a fresh start and that is pretty common.

Bankruptcy property exemptions are complicated. There are federal exemptions and there are state exemptions. Some states will give you a choice between using the exemptions of the state or the federal exemptions. But some states will not let you choose. You have to use the bankruptcy exemptions of that state.

The states that will not allow you to use the federal property exemptions for bankruptcy are Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming.

You will need to value your stuff in order to figure out how much of it is exempt. One thing to keep in mind when valuing your stuff is that your stuff isn't worth what you think it is. You may have paid 2000.00 for your couch two years ago, but it's only worth a tiny fraction of that now.

My lawyer had me value most of my items at "garage sale prices" and that's exactly what I did. However, I am not an attorney so please discuss this with yours.

You may have other considerations when it comes to your property in a chapter 7. It is possible to keep items for which you have secured loans, such as a house, or car, by either reaffirming or doing what is called a ride-through. In either case, you keep paying for them. Which of the two, if either, you do, will depend on your wants and circumstances so---yeah---another thing to discuss with your bankruptcy lawyer.

Another thing that you should know is that you must have lived for two years in the state in which you are filing bankruptcy to use the exemptions of that state. Otherwise the exemptions of the state in which you lived in for six months prior your move will apply.

The laws regarding bankruptcy and property can be a bit confusing but try not to panic. A good bankruptcy attorney will make it so you retain as much, if not all, of your property as possible.

I will list the California bankruptcy exemptions (California gives filers a choice of two sets) in another post.

As always, good luck to you...I wish you the best 2011 possible!


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