If you’re considering bankruptcy, you probably worry about giving up your car or home that you own. During a Chapter 13 bankruptcy, in which you keep paying your debts usually at a reduced rate, you probably won’t have to sell your home or car. Generally, you can keep your property as long as you can make payments. A Chapter 7 bankruptcy is one in which your debts are discharged. You may be required to sell some assets to repay creditors a portion of the debt. But it depends on many things.
Some Property Is Exempt
In a Chapter 7 bankruptcy, some of your assets will be exempt from the bankruptcy. You may be able to keep your home, up to a certain amount of equity. If you are married, that exemption is doubled because your spouse also gets to claim an exemption, provided you are both going through the bankruptcy. Your car may also be exempt, up to a certain valuation. If your car or home is above the valuation determined by law, you may have to sell it and use some of the proceeds to pay off creditors. You will have to continue making payments on your car or home.
Although every state has different valuations on exempt property, you will almost certainly get to keep your household items and clothing. In most states, you also get to keep tools of your trade, to let you continue working. Some pension plans are exempt in bankruptcies. Even public funding, such as social security or Earned Income Credit may be exempt.
How Does the Court Determine Which Property Is Sold and Which Isn’t?
When you file for bankruptcy, you must give the Trustee, the person overseeing your bankruptcy, a list of assets. You will probably also tell the court if those assets are exempt or not. If you have nonexempt property, the Trustee may or may not take it. Sometimes, the time spent selling an item isn’t worth the money that would be received. If you own a car worth $8,000, but still owe $6,000, the cost of repossession, storage and selling the car wouldn’t make sense. You may also be able to negotiate with the Trustee on nonexempt items, if you give up another piece of property. In most places, a wedding ring is exempt under bankruptcy, but an engagement ring might be a separate item.Discuss your bankruptcy with an experienced bankruptcy lawyer in Manchester, CT, like from Chorches Bankruptcy Law, who can help you understand which property is exempt and which isn’t.