Quite often people who are considering bankruptcy are worried about losing everything they own. Fortunately, most people do not lose any belongings when filing bankruptcy. There are exceptions, of course, if you own things like expensive vehicles that are paid off, but these exceptions don’t apply to most people. If you do have an expensive item you want to keep, you can usually find a workable solution with a Chapter 13 bankruptcy case, and still keep the item. But, if you’re like most people and have ordinary stuff, you probably won’t lose any of your stuff with a Chapter 7 or a Chapter 13 bankruptcy. If you’re thinking about filing, we’ll review all of your assets with you and let you know if there’s anything to worry about. Following is a list of typical items which are not a problem:
- furniture & appliances
- vehicle (that has a loan, or is older)
- typical tools
The exception to this is when you have a loan on these items. Depending on whether you file a Chapter 7 or Chapter 13 will determine if you continue making payments after the bankruptcy is filed (Chapter 7) or if the payments are calculated into your bankruptcy plan payment (Chapter 13.)
A Chapter 13 bankruptcy protects nearly all of your assets. The exceptions are items that are considered “luxury” items such as: boats, ATVs, campers, elaborate jewelry, etc. If you are making payments on any of these types of items then you might have to surrender the property. If you own the property outright, then you may be allowed to keep it in a bankruptcy but it might affect the amount you pay in a Chapter 13 bankruptcy.
A Chapter 7 bankruptcy only allows you to have a certain amount of equity in major assets such as house, a vehicle, boat etc. If you have little to no equity in these assets, you have the option of continuing to make the loan payments after your Chapter 7 bankruptcy is filed. If you exceed the allowed equity amount for these items, you would be required to turn over the property to the Chapter 7 Trustee. For example, each debtor is allowed to have $3,000 equity in a vehicle. This means that if you own your vehicle and it’s worth more than $3,000 then the Chapter 7 Trustee may require the vehicle to be turned over to the trustee. If you have a loan on the vehicle, then it’s unlikely that you have enough equity for it to be a problem. Keep in mind that if you are married and have two vehicles, you and your spouse are each allowed $3,000 equity for a vehicle.