You Can Keep All of Your Assets in Chapter 13 Bankruptcy
You can protect your assets in Chapter 13 bankruptcy because Chapter 13 is not a liquidation. You get to keep everything you own in Chapter 13. There is no danger that you will lose your home, your car, your savings or any other asset to the Chapter 13 trustee. This is one of the most compelling reasons to file a Chapter 13 bankruptcy, and it makes Chapter 13 a far safer choice for those seeking debt relief who might risk losing an asset to a Chapter 7 bankruptcy trustee.
When meeting clients for the first time, we are often asked, if they can leave their car or their home “out of the bankruptcy.” What they are really asking is whether they will lose their car or their home if they file bankruptcy. There are really two separate issues here. First is whether the client will be able to keep his car or home that he intends to continue making payments on. In other words, will the lender take back the vehicle or foreclose on the home just because the person filed bankruptcy. The answer to that question is “no,” provided he remains current with his monthly payments and cures any default in payments. Though with car loans, a lender can require a reaffirmation agreement in Chapter 7 bankruptcy.
The separate issue is whether a bankruptcy trustee will take the home or the car. The answer to that question is: “never in Chapter 13 bankruptcy.” You can keep all of your assets in Chapter 13 bankruptcy.
What About Assets in Chapter 7 Bankruptcy?
Protecting our clients’ assets is one of our most important concerns in evaluating whether a Chapter 7 or a Chapter 13 bankruptcy is better for a particular client’s situation. Chapter 7 bankruptcy is a “liquidation” bankruptcy. The basic bargain provided by the law to the debtor goes like this: the debtor proves that she has no ability to make monthly payments on her unsecured debts by showing that she has no disposable income after necessary living expenses. Based on her inability to pay such debts, she can get a discharge of most unsecured debts (with certain exceptions) and can get a fresh start free of ever having to pay them. However, bankruptcy looks closely at her assets too. If she has significant assets that she could sell to pay her debts, then filing a Chapter 7 is the wrong choice. That’s because a Chapter 7 trustee can take non-exempt assets from the debtor, liquidate these assets and pay something to the creditors.
Most Chapter 7 cases, however, are “no asset” cases. This means that the exemptions (the dollar values of various assets that a debtor is allowed to protect and keep) are sufficient to protect all of the Chapter 7 debtor’s assets. Most individuals who Chapter 7 bankruptcy can “exempt” all of their assets. If you can’t then you should consider filing a Chapter 13 bankruptcy.
We are here to help solve your debt problems, get you a fresh start and also to protect the assets that you have. Bankruptcy can be complicated. Our bankruptcy attorneys help guide our clients every step of the way.
