Will I Lose My Personal Belongings if I File Bankruptcy?
This is one of the most frequently asked questions from our clients—the fear that filing a bankruptcy will result in a trustee taking property from them. Luckily, the Bankruptcy Code allows debtors to maximize “exemptions”, and in many cases, protect their assets.
Exemptions are protections provided under the Bankruptcy Code for personal property and real property. Personal property such as money in a bank account, household goods and furnishings, retirement accounts and even vehicles are protected by exemptions up to a certain amount (which we will be happy to discuss with you!) Additionally, in many cases, equity in your home can also be protected by the Homestead Exemption.
Chapter 7 & Chapter 13 Exemptions
Exemptions are a useful item in both Chapter 7 and Chapter 13 bankruptcy cases. In Chapter 7 cases, exemptions will be listed on a client’s schedules (the paperwork filed with the bankruptcy court) and the trustee assigned to the case will review them to ensure that all claimed exemptions are proper. Again, there are limits to these exemptions and only certain amounts can be claimed. However, if our clients do have any assets with additional, non-exempt equity, a reasonable solution can typically be reached with the Chapter 7 Trustee regarding the next steps.
In Chapter 13 cases, exempt or non-exempt assets (along with other factors) will help determine the amount that will need to be paid back to creditors over the course of the repayment plan—creditors in a Chapter 13 case will need to be repaid the same amount they would receive if the case were a Chapter 7 case (this is called the “Best Interest” test).
So although in some cases, personal or real property may be at risk, in many cases, the exemptions are tools that you as a debtor can use to maximize your protections under the Bankruptcy Code and begin your fresh start!
Contact our firm today and discuss your case with our bankruptcy attorney in Columbus, OH.