Bankruptcy Myth 03
If I file Bankruptcy, I'll loose my house, car, and everything I own.
The Chapter 13 trustee has no authority to take property from you and sell it. You may, however, be thinking about Chapter 7.
Only about one person in twenty looses an asset to the Chapter 7 trustee. The reason the overwhelming majority of Chapter 7 debtors are able to keep all their property is because certain state and federal laws (called “exemptions”) place certain property “off-limits” to a Chapter 7 trustee. In other words, exemption laws protect most of your assets from the reach of the trustee.
Your attorney will know how to assert your exemption rights to protect your equity in many assets. For example, in South Carolina, the homestead exemption was recently increased to protect a $50,000 of equity in your home. If you and your spouse own the home together, you get $100,000 of protection. You heard that right, if you and your spouse own the home together, the trustee can’t touch your home except to the extent that you have more than $100,000 of equity. Please note that the result can be different if you recently moved to South Carolina, or if you don’t properly claim the exemption, or if you live outside South Carolina.
Similar exemptions protect equity in your car, your retirement accounts, household items, tools of the trade and other asset types. Part of an attorney’s job is to advise you about which assets (if any) may be at risk and, if appropriate, take steps to protect those assets before you file.
What asset is most commonly forfeited to a Chapter 7 trustee? Probably, tax refunds owed to the debtor before the case was filed. The trustees are generally not interested in ordinary household items such as furniture, lawn mowers or guns – unless of course these items are of serious value to collectors. Generally speaking, the belongings of most debtors are either of insufficient value to interest the trustee or they are protected by exemption laws.
Will the trustee poke around your house looking for assets to sell? No … that almost never happens.
If you have assets that for some reason are not sufficiently protected by exemption laws you may want to consider filing under Chapter 13. In Chapter 13, you’ll repay a portion of the debts through a court supervised repayment plan. No one looses assets in Chapter 13, so long as they can make the necessary payments to the lien holder. And, even if you are behind on your car payment or house payment you will generally be allowed to keep the property if you can pay for it.
Exemption rules are tricky. We perform an exemption analysis (and lien search) during the first appointment to identify if any property is at risk. To schedule a free, relaxing debt consultation, call us now at 864-239-0007 or toll free at 1-888-711-3422 (South Carolina residents only)
