What Property Can You Keep With Chapter 7 Bankruptcy?
If you are facing Chapter 7 bankruptcy, you may be worried about losing some or all of your property. The rules governing Chapter 7 are quite complex; but in practice, in the majority of cases, filers get to keep most of their property and possessions.
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Home
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The biggest concern for many people who own their own homes, is whether they can hold on to the property during a Chapter 7 filing. The answer to this is usually in your state's homestead exemption. Each state allows you to exempt a different level of equity in your home from consideration by your creditors. If your equity is below the homestead exemption for your state, and if you are still current with your mortgage, you can keep your home. If your equity exceeds your state's exemption, your home can be sold by the bankruptcy trustee who will use the proceeds to pay off some of your unsecured debt.
Car
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You may usually keep one vehicle, so long as its book value is below your state's exemption amount. If you are still paying a note on the car, you must keep up payments in order to retain the vehicle. Your bankruptcy filing will usually allow you to renegotiate loan terms with your finance company or give you the option to purchase the car for a lump sum.
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Retirement Savings
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Very high exemption levels are generally set for qualified retirement savings in accounts such as a 401k and an IRA. In practice, you are usually able to keep all of your retirement savings. You can also generally keep the cash value held in a life insurance policy, up to your state's exemption amount.
Consumer Goods
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If you owe money on any items such as a TV, washing machine or other household good and you have defaulted on the loan, the creditor can seize the item in lieu of the debt. However, if you are current on the loan and wish to keep the item, you can ask for this debt to be reaffirmed in your bankruptcy filing and it will not be affected.
Items You May Lose
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If you have expensive items that are deemed by the bankruptcy trustee to be unnecessary, these are at risk of being seized and sold to pay back your creditors. This might include nonexempt savings accounts, stocks and bonds, lavish clothing or jewelry, extra vehicles and vacation homes.
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