As the economic downturn continues, many people are finding themselves more and more in a financial bind. It can be incredibly stressful trying to figure out a way to get one’s finances back on track and pay off any debts. One of the most common forms of debt relief is filing for bankruptcy, which can take different forms. Chapter 7 bankruptcy is one form of bankruptcy that allows an individual to discharge certain types of debt. But when you file for Chapter 7 bankruptcy, one of the biggest questions people ask is: what assets can you keep?
By exploring what assets can and cannot be kept, you’ll be better prepared to make an informed decision regarding your financial future.
Understanding Chapter 7 Bankruptcy
Chapter 7 is a form of bankruptcy that is called “liquidation.” It means that if you are eligible and decide to file for bankruptcy, your non-exempt property and assets will be sold to pay off your debts. Also, this means that exemptions may apply to some assets and property, letting a debtor file for bankruptcy and still keep them.
Ways to Determine the Value of Your Assets
In a bankruptcy filing, you must know what assets can be kept and which must be used to pay off your debts. In addition, the value of your property plays a huge role during the bankruptcy process, and it’s essential that you’re aware of how your assets are valued and which assets may be exempt from the asset liquidation process.
Fair market value shouldn’t be the same as the value used in a bankruptcy case.
When considering real estate or vehicles, valuing them based on their fair market value could be a more accurate representation of their true worth. It is also possible in some cases to retain ownership of the item while using its value as part of a debt repayment plan.
Understand if any of your personal property is protected by federal or state exemptions.
Certain assets, such as belongings secured through superannuation schemes, do not have to be included in the computation for allowable expenses. Other types of exempt assets include certain life insurance policies, homes up to a certain dollar amount, and vehicles within certain limits. To determine if any of your assets are exempt from asset liquidation, it is important to research relevant state laws and work with an experienced bankruptcy lawyer who can assist you with this process.
Additionally, the Bankruptcy Court requires that the debtor give an exact breakdown of asset value for all applicable federal bankruptcy exemptions. This includes all debts, mortgages, and other fees attached, so debtors must make sure to get an accurate assessment from their financial professional or risk losing their valuable possessions upon liquidation.
Knowing the estimated and fair values of your assets before filing a bankruptcy petition can help you make an informed decision about how best to structure your proceeds and limit losses during Chapter 7 bankruptcy proceedings. Thus, consulting a timely and knowledgeable source is essential when attempting to discover the true value of movable and immovable assets prior to filing.
State Exemption Laws vs. Federal Exemptions
State and federal exemptions are an important part of any successful Chapter 7 bankruptcy. Exemption laws allow debtors to retain certain property or assets during the bankruptcy process, based on a set of regulations. Understanding these laws and how they work is important in order to get the most out of a Chapter 7 bankruptcy.
The amount of assets allowed to be kept in a Chapter 7 bankruptcy depends largely upon state and federal laws. Some people argue that federal exemption laws offer more protection and flexibility than state exemption laws. Federal law allows a wide range of assets to be kept regardless of where the debtor lives, while state laws may provide different amounts of protection depending on the location.
On the other hand, some people feel that state laws should take precedence over federal legislation when it comes to asset exemptions for bankruptcy cases. They argue that giving states greater autonomy would give those struggling with bankruptcy more options for protecting their assets under the umbrella of their own state’s regulatory system.
By qualifying for Chapter 7 bankruptcy and being aware of applicable exemption laws, debtors can ensure that they keep their desired assets during the bankruptcy process.
Keeping Specific Assets
Generally speaking, you can usually keep specific assets, such as a retirement account or a home, if certain conditions are met.
- Retirement accounts: such as an Individual Retirement Account (IRA), 401(k), or other similar accounts, are considered exempt from bankruptcy proceedings. This means that any funds that have already been contributed to an IRA or 401(k) will remain untouched by the bankruptcy court unless they have been used as collateral for another loan or have otherwise been put at risk for other financial offenses. However, be aware that this exemption does not apply to all types of retirement accounts, so you should consult a qualified attorney before filing for bankruptcy to make sure all of your accounts are adequately protected.
- Assets like homes under certain conditions: Depending on the value of the home, it may be fully exempt from seizure by creditors or partially exempt but subject to certain liens and restrictions. If a person’s home is valued at less than the exemptions applicable in their state, then they may be able to protect it fully under bankruptcy proceedings; if not, then they may need to negotiate with creditors in order to avoid foreclosure.
The ability to keep specific assets can be an important factor in deciding whether or not Chapter 7 is right for you. While certain assets, like retirement accounts and homes, may be exempt from seizure during bankruptcy proceedings, others may be subject to liens and restrictions if their values exceed allowable exemptions. Ultimately, understanding what assets you can protect in Chapter 7 bankruptcy can help ensure that you get the best possible outcome from restructuring your finances.
Consult With Our Experienced Bankruptcy Attorney in Media, PA Today
To determine whether or not your assets qualify for protection under exemptions, you can consult with an experienced bankruptcy attorney in Media, PA. At Siddons Law, we can advise you on specific exemptions that may apply in your situation. It’s important to remember that if an asset is not protected under an exemption, then it may be liquidated by the bankruptcy trustee in the bankruptcy case and used to pay creditors.
Frequently Asked Questions
Are there any assets that cannot be kept during a Chapter 7 bankruptcy?
Yes, there are certain assets that cannot be kept during a Chapter 7 bankruptcy. Certain types of assets are considered exempt and protected from liquidation during a Chapter 7 bankruptcy. These include a primary residence, vehicles valued up to a certain amount, furniture, clothing, pensions, and other basic necessities.
What are there certain types of assets that can be protected during Chapter 7 bankruptcy?
The most common types of asset protection include exempt property, such as retirement accounts, equity in your home or car, earned income tax credits, life insurance policies, and personal possessions with sentimental value.
Are there any strategies to maximize assets secured during Chapter 7 bankruptcy?
Yes, there are strategies that can help maximize assets secured during Chapter 7 bankruptcy. The most important strategy is to properly utilize exemptions. By taking advantage of the exemption amounts available in their state, a debtor can protect assets from being taken and sold off to satisfy creditors.
How does Chapter 7 bankruptcy affect a debtor’s assets?
Chapter 7 bankruptcy is a type of bankruptcy that is designed to eliminate most debts and give debtors a fresh start. In this type of bankruptcy, a debtor’s assets are liquidated, and the funds are used to pay creditors according to their priority, in full or in part.
This means that all non-exempt assets owned by the debtor may become part of the bankruptcy estate, which can include automobiles, homes, and other belongings. As a result, these assets may be sold off by court-appointed trustees in order to pay off creditors. Once all available funds have been exhausted, any remaining debts will be discharged.