The idea you’ll lose all your stuff in bankruptcy is perhaps the biggest misconception people have about bankruptcy, and the number one fear that ensures people wait too long to file. Plenty of clients come to our offices with visions of someone carting off everything they own in a moving van.
Fortunately, that never happens.
Chapter 13 vs. Chapter 7
First, you need to understand the difference between Chapter 7 and Chapter 13.
Chapter 13 allows you to restructure your debt by making regular payments on it. A trustee manages these payments and distributes them to creditors. The creditors don’t get paid as quickly as they’d like, but they get paid.
In a Chapter 7, theoretically you are liquidating assets to pay off creditors, then discharging the rest of the debt as unpayable. But an asset is only an asset if it is non-exempt property.
Exempt Property vs. Non-Exempt Property
Exempt property cannot be liquidated in a bankruptcy. The exemption list is fairly generous and covers most of what many people who can pass the Chapter 7 means test tend to own in the first place. In 90% of all Chapter 7 cases, the trustee takes nothing at all.
Unless you have special, expensive equipment or expensive antiques, you’re unlikely to lose anything from within your home. Homes and cars are difficult to keep in a Chapter 7, but we can advise you if there’s a way for you to keep both and use Chapter 7. Often, people who want to file save either of those assets should opt for Chapter 13 instead.
The Reality: A Lot of Property Just Isn’t Worth It
A lot of the property we own and use doesn’t have a lot of resale value. Sometimes the amount one might expect to receive is a lot less than the cost of transporting or storing those goods. Sometimes goods are just too hard to sell.
It’s Possible to Negotiate
If you have a piece of non-exempt property you really love and need you might be able to convince the trustee to let you keep it if you exchange it for something else. You might also be able to buy the property from the trustee.
Some trustees will play ball, some won’t, but there’s no harm in asking.
Protecting Property: A Great Reason Not to Go It Alone
The rules for protecting property may look straightforward on paper. In practice, they’re anything but. If you have specific property you’re worried about protecting that’s just one more reason to take advantage of our free consultations.
We are experienced bankruptcy attorneys who can help you get a fresh start with a minimum of pain. Call us today to set your appointment.