Bankruptcy allows filers to get some immediate relief from debt collections. Debt collections are not just annoying, they can result in court judgments, foreclosures, wage garnishment, and other serious measures. Bankruptcy is about more than putting a stop to debt collection activity, though. The property the filer owns can temporarily come under the control of the bankruptcy trustee and can be seized. Read on to find out about the role property plays in a chapter 7 bankruptcy and what a zero asset bankruptcy means.
You Won't Be Left With Nothing
While you theoretically can lose some of your property, that is not what bankruptcy is about. Efforts are made, through the bankruptcy codes, to allow filers to retain some or all of their personal assets. While chapter 7 is known as a liquidation action, that really applies more to businesses that have lots of inventory to sell when declaring bankruptcy. One of the ways the bankruptcy codes work to protect filers is by exemptions.
What to Know About Bankruptcy Exemptions
Exemptions name certain items of property that cannot be touched by seizure. That might include things like work tools, heirloom jewelry, the homestead (your main family home), vehicles and more. When a filer has nothing to be seized – given the exemptions of the state in which they live, they are said to have a zero asset bankruptcy. The filer still has assets, just none that can be seized by the bankruptcy trustee. You should note that exemptions vary by state. Some allow you to keep more property than others. If you have a lot of property that might be subject to seizure, speak to your lawyer about your situation.
How Value Affects Exemptions and Assets
Don't misunderstand how an exemption applies to things. Some items will need to be appraised to determine the value. For example, if you can keep $10,000 work of personal jewelry, that value is determined by using liquidation value, not resale value. Often, the liquidation value of an item is far lower than the resale value. In addition, filers who still owe money on an asset should take that into account. Subtract the loan balance from the appraised value to determine how much the asset is worth for bankruptcy exemption purposes. If you own a vehicle with a large balance owed on the loan, the bankruptcy trustee is not likely to be interested in seizing it.
Don't let exemption confusion or fears of losing property deter you from seeking bankruptcy relief. Speak to someone that offers law firm services about your situation today.Share