It is true that bankruptcy has some kind of an effect on all parts of your finances, but what about your property? Many people assume that filing bankruptcy means that you have to give up your property, but that is not the case. In most cases your property can be safe from liquidation as long as you are current on the payments. Here are some cases where your property may not be safe:
- You have a high amount of equity in your home – Because of the housing crisis our nation has faced over the last several years this situation does not apply to a lot of Americans. However, some individuals have a balance that is much less than the fair market value of their home resulting in an amount of equity that the court may want to use to pay creditors. In most cases this will be something discussed between you and your bankruptcy lawyer so that it does not have to be a surprise.
- You have paid in full vehicles and/or homes – As far as the bankruptcy court is concerned, any paid in full vehicle or home that you own is considered an asset that could potentially be sold in order to pay back your creditors. Typically the court will not choose to liquidate the sole vehicle for the household because they understand that it is necessary in most areas in the company. However, when a family has several paid in full vehicles the court will want to evaluate which ones are not necessary. The same is true for homes.
- You have valuable “luxury items” – The definition of luxury items will differ with each case, but basically it can be any item of a large value. Common luxury items that are liquidated in bankruptcies are boats, jewelry, art, and high end electronics. Again, you most likely will have discussed these items with your attorney beforehand so you will know if there is any chance that you could lose them.
The good news is that even if you own some of the items mentioned above there are exemptions in each state that will protect a certain value. For instance, in Illinois a married couple filing bankruptcy can have up to $30,000 in equity and keep their house because the exemption keeps the home safe. If they had more than $30,000 then the bankruptcy court may suggest selling the home. Exemptions are created by the states specifically for their citizens and your local bankruptcy attorney will be privy to what they can and cannot protect. If there is a certain item, or set of items that you are worried about protecting just contact a bankruptcy attorney and ask them a few questions.