Can I Keep My Cell Phone If I Claim Bankruptcy?


Whether or not you keep your cell phone through bankruptcy depends on which bankruptcy chapter you file under, which state you live in and what you decide to keep through your personal property exemption. If you file under Chapter 11, you can keep your cell phone as long as you continue to pay your bills. If you file under Chapter 7, you will most likely have the option of keeping your cell phone.

Chapter 11

Individuals can file for one of two kinds of bankruptcy. Chapter 11 of the bankruptcy code halts all collection efforts and sets up a court-administered payment plan. You agree to make monthly payments toward your debts, a judge decides how much you can afford to pay each month and your creditors must accept the plan. As long as you continue to make the payments, you keep your property, including any cell phones.

Chapter 7

Chapter 7 of the bankruptcy code charges a court-appointed trustee with selling off your property and distributing the proceeds and any money you have to your creditors, after which the court discharges (erases) your outstanding debts. Every state allows people filing for Chapter 7 bankruptcy to claim exemptions. Exemptions are property that the state has deemed necessary for the filer to keep in order to reestablish himself, such as a house, one vehicle and clothing.

Personal Exemptions

Within the list of exemptions, states allow personal property and tools or property used for a trade or business. All states assign a maximum dollar value to what can be claimed as exempt. The amount listed is market value: what you could likely get if you sold an item now, not what you paid for it originally. Depending on the state, the value of exempt personal property or tools can be anywhere from a few hundred to tens of thousands of dollars.

Cell Phones

If you use your cell phone for work, you can claim it as exempt under the tools and business exemption. If you do not, check and see if your state includes cell phones in the list of eligible personal property; most do. However, the personal property category also includes items such as clothes, furniture and jewelry, and if you live in a state with low exemption amounts, you may have to decide between your cell phone and other property.

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