What can be lost in bankruptcy?
The process of declaring bankruptcy can be confusing. There are both federal and state laws which come into play. You attorney will guide you through what is included in the bankruptcy and what assets are exempt in your particular case. Bankruptcy law offers many exemptions, which vary from state to state.
A Chapter 7 bankruptcy filing will wipe out nearly all one’s debts, but expensive musical instruments, valuable stamp or coin collections, family heirlooms, antiques, most cash in back accounts, stocks, tax refunds, second vehicles and vacation homes may be subject to loss. In a Chapter 7 “no asset” case and a Chapter 13 bankruptcy (where debtors are set up on a more reasonable repayment schedule), no assets are lost. Each state offers exemptions and limits and attorneys generally work to see their clients lose little to nothing. Homes are not always considered exemptions, although equity is factored in.
Video: The Truth About Bankruptcy
How are home asset values calculated?
A lawyer helps their clients calculate the value of assets, whether it’s a home, a car, stocks or personal property. For a house they’ll look at the resale value of the home based on a county assessment minus the money still owed to calculate the equity owned. For example if a home is valued at $120,000 and the loan amount is for $100,000, then the owner has $20,000 in equity. If the home is in the state of Missouri, the housing exemption is $15,000 so the owner will have to pay $5,000 ($20,000 in equity minus the $15,000 exemption) to the trustee in order to keep the home.
What assets must be filed?
In order to avoid committing bankruptcy fraud, one must be careful to list all personal and real assets. Include everything you own even if you believe there is no equity in the items. These assets include (but are not limited too) homes, cars, boats, guns, valuable collections, jewelry, pets, airline miles, clothing, household goods worth $1000+ and inheritances.
Video: Assets that are exempt in a bankruptcy filing
How are assets valued?
To determine asset value lawyers tell their clients to look at the “garage sale value”. This is not the same a retail value paid. Letting pride get in the way is a big mistake people make when filing for bankruptcy. Many people would like to believe their plasma screen television is worth the $1,000 they paid for it back in 2000. However, the resale value at a liquidation auction may only be $300. If property is co-owned, only the debtor’s share is assessed. A certified valuation expert can be helpful in bankruptcy proceedings.
What is a “Homestead Exemption?”
A “homestead” is considered the primary residence of the debtor. In some states real property is protected up to a set value ranging from just $5,000 in Ohio to $350,000 in Nevada. In other states, the property is protected up to a specified acreage. In Florida and Texas, the homestead is limited up to 160 acres. The federal homestead exemption is capped at $125,000. To qualify, homes must have been purchased at least 1,215 days prior to filing for bankruptcy.
Can Bankruptcy Proceed Without a Means Test?
During the means test, the debtor’s income is compared to the state median income. Next allowable expenses are factored in to gain a picture of the projected disposable income, which must be less than $6,000 over a five-year period. In Chapter 13 bankruptcy, the debtor needn’t take a means test to determine eligibility. In all Chapter 7 filings, the test must be taken, although 96% of the applicants end up qualifying.
Can assets be recovered, hidden or liquidated?
Many people don’t know that asset protection is legally available to them, even if they have filed for bankruptcy. While planning for bankruptcy, it’s fully legal to sell off items to pay off outstanding IRS tax debt. In states with large homestead exemptions, it makes perfect sense to pay down one’s mortgage. Sixty days before filing, a debtor can take a credit card cash advance to pay off living expenses or lawyer fees worth $1075 or less. Money can be contributed to an annual IRA account since retirement funds are exempt. A life insurance policy may be taken out, which is also exempt. Debtors can sometimes buy unprotected assets back from their trustee by paying off the non-exempt amount. It’s not recommended that anything be covertly hidden or given to relatives “for safe keeping” because that’s considered a federal offense punishable by prison sentences.
When will assets be seized and sold?
Once the paperwork is signed, the trustee may request assets at any time. Debtors usually have between a month and three months from the time of filing before meeting with a bankruptcy trustee to liquidate assets. If the debtor is particularly worried about holding on to assets, he or she should prepare for bankruptcy several months in advance, work with licensed attorneys and consider filing for Chapter 13, rather than Chapter 7.
Attorneys specializing in Bankruptcy
Bankruptcy Attorney: Timothy G. Cook
Firm Name: Timothy G. Cook Law Offices
City: Atlanta
State: GA
Phone: 770-426-8711
Bankruptcy Attorney: Peter D. Grubea
Firm Name: Law Offices of Peter D. Grubea
City: Buffalo
State: NY
Phone: 1-888-496-8971
Bankruptcy Attorney: Michael B. Feinman
Firm Name: Feinman Law Offices
City: Andover
State: MA
Phone: 978-475-0080
Bankruptcy Attorney: William F. Kunofsky
Firm Name: Debt Fighters / Law Office of William F. Kunofsky
City: Dallas
State: TX
Phone: (214) 369-1040
Bankruptcy Attorney: Robert I. Cohen
Firm Name: Denver Bankruptcy Law
City: Denver
State: CO
Phone: 303-830-2811
Bankruptcy Attorney: Conrad Adams
Firm Name: Bailey & Galyen Attorneys at Law
City: Houston
State: TX
Phone: 1-800-259-8008
Bankruptcy Attorney: Kathleen P. March
Firm Name: Bankruptcy Law Firm, P.C.
City: Los Angeles
State: CA
Phone: 310-559-9224
Bankruptcy Attorney: Robert Braverman
Firm Name: Law Office of Robert Braverman, LLC
City: Philadelphia
State: PA
Phone: 856-348-0115