If I File Bankruptcy, Can I Keep Some Of My Property? Answer: Yes. Probably All Of Your Property, As Will Be Exempt!
When you file a bankruptcy case, you create what is referred to as your bankruptcy “estate”. The estate consists of two parts: One part is property (your belongings such cars, household goods, furniture, clothes; literally everything you own) that you claim as exempt under bankruptcy law. This means you are allowed to keep these items of property, as they are exempted from, or not part of, the estate. The other part of the estate consists of non-exempt property, which is property that must be turned over to the bankruptcy trustee assigned to handle (“administer”) your case. This is an important area where my experience and expertise as a South Florida bankruptcy attorney is of great importance, in advising clients, pre-filing, of what is exempt and what is not. Indeed, I often assist clients in what I term “negative estate planning”, to maximize the utilization of their exemption rights.
When I explain how exemptions work to a client, I always use the term “theoretical” when referring to the non-exempt part of the estate, and I stress the word theoretical to them, because most of the time there is no non-exempt property in a chapter 7 filing. That is good news, because it means my clients get to retain (keep) all of their property as exempt.
If there is to be property that is not exempt, or sometimes called over-exempt property, which must be turned over to the trustee, terms are negotiable. By example using the most common over-exempt asset, a client might own an automobile free and clear of any liens, which will be partially over-exempt. An individual debtor is allowed to keep (exempt) $1,000 worth of ownership in a vehicle. If at the time of filing their car is worth $4,000 (Blue Book, KBB fair market value), they are therefore $3,000 over-exempt. The trustee would much prefer to not have to take and auction the car, and we can negotiate a deal, to buy back (“redeem”) the debtor’s over-exempt interest in the auto with the trustee. Again, this is where my expertise as a Ft. Lauderdale bankruptcy attorney works to a client’s great advantage. If the client for some reason prefers to not redeem their interest and wants to just turn the car over to the trustee, the trustee will auction it and in due course the client is actually entitled to be paid their $1,000 exemption value from the proceeds.
There are a myriad of allowed exemptions, including a homestead (no matter if owned free and clear, with some restrictions), IRA, 401-K or any kind of retirement or pension, social security, etc. Non-homestead real property is not exempt, but if a property is upside down or for some reason is of no value to the estate, the trustee may well abandon his or her interest in the property or other asset and the debtor then can retain it, or just walk away from it, without exposure to a later deficiency claim, as a result of the bankruptcy discharge. It’s the best of all worlds!
Personal property is exempt up to $1,000 per individual or $2,000 for a joint filing, or a total $4,000 per person if the debtor(s) do not claim a homestead. This property would be your household goods and furnishings, furniture, clothing, jewelry; everything you own.
But as an experienced South Florida bankruptcy attorney, I advise clients to put a low-end, swap shop value on their personal property. By example: “Misc. household goods and furnishings, average age 10+ years old, value $950”, “misc. men’s clothes, value $100”.
No one is going to visit your home or apartment and perform an appraisal, unless you perhaps own a homestead valued at $1,000,000 and list your furniture valued at $500. That might get the trustee’s attention for further inquiry. Indeed, filing a bankruptcy owning a million dollar home will cause extra scrutiny to a case, but that scenario is extremely rare. Most of my clients are average folks with just too much debt.
There are a lot of moving parts in a bankruptcy case and exemptions are a large part of a case. The advice and perhaps pre-planning to position a client so that when they do file any non-exempt assets no longer exist and all their property is now exempt at the date of filing is what good bankruptcy attorneys do.
I offer a no-cost initial consultation to assess the client’s circumstance, explain how the process works, advise on what to expect if wee proceed, and perhaps assist in some pre-filing, negative estate planning, all coming from my 35 years experience and knowledge gained as a seasoned Ft. Lauderdale bankruptcy attorney.
As stated on my website, I help people get out of debt and have a life again. And I enjoy doing it. It’s good to help people. I take your personal financial problems personally!