One of the most common questions we are asked is, “What can I keep in bankruptcy?”Another popular question asked by bankruptcy filers is, “Will I lose any of my assets in bankruptcy?” The short answer is, “No,” but you should keep reading anyway.
Your assets come into play more in a Chapter 7 bankruptcy than a Chapter 13. This is because the Chapter 7 trustee’s focus is on the value of your non-exempt assets. The Chapter 13 trustee’s focus is on your household disposable income.
What are your “non-exempt” assets? Under Florida law, certain property is protected from creditors and the bankruptcy trustee. For instance, all of your home equity is exempt, subject to some rare restrictions. You also have exemptions for retirement accounts, workers comp proceeds, personal property, equity in a car or truck, and more. On our website, we provide a full list of Florida exemptions. So, the trustee is going to look at the value of all of your assets and subtract any of these exemptions. The excess value is known as your “non-exempt assets.”
Asset values are more heavily weighed in Chapter 7 cases. If the trustee does not agree with the values you place upon your assets, they have the right to hire, at their expense, an appraiser to value all of your non-exempt assets. This is usually just the personal property. Vehicle value is usually deemed by NADA or Kelly Blue Book.
In reality, a Chapter 7 trustee doesn’t want your things. Rather, they know that the person who wants your things more than anyone else in the world is you. So, what the Chapter 7 trustee really wants is for you to “buy back” your non-exempt assets. For this reason alone, you should NEVER try to file a Chapter 7 without a lawyer. Chapter 7 trustees get much larger buyback agreements from pro-se debtors. A bankruptcy attorney knows how to challenge values and work with with the trustee. This ensures your buyback agreement is as low as it can be. The trustee only takes non-exempt assets when the debtor has no interest in buying them back.
What happens to that money the Chapter 7 trustee collects? They keep 25% of the money as a fee, and use the remaining 75% to pay any costs of collection. Any money that remains after paying costs is paid to your creditors pro-rata.
The Chapter 13 trustee is concerned with your disposable monthly income more than your assets, but asset value does come into play in Chapter 13. In a Chapter 13 Plan of Reorganization is that unsecured creditors be paid at least what they would have been paid if the debtor filed a Chapter 7. This is known as a “liquidation analysis.”
Unlike Chapter 7, a Chapter 13 trustee usually accepts the debtor’s valuation of their personal property. It is very rare for a Chapter 13 trustee to hire an appraiser to value a debtor’s non-exempt personal property. In addition, the liquidation payments to unsecured creditors can be spread out over 5 years, instead of the typical 12-month buyback agreement. For these reasons, Chapter 13 is often the preferred path for debtors with a lot of non-exempt assets.
The decision to file for bankruptcy is a difficult and lengthy one that should not be done without the legal guidance of an attorney that you trust. At Parker & DuFresne we specialize in bankruptcy law, and our goal is to get clients back on the road to financial stability. Through a thorough consultation, we’ll help you determine if bankruptcy is the right solution for you and help you identify exemptions specific to your case while we develop the legal strategy best suited for your case.
In addition, we will give you the knowledge, the tools, and the motivation to rebuild your credit. You can start over with a fresh financial outlook.
Contact us today to learn more!
Parker and DuFresne