FAQ About Saving Assets and Income During Bankruptcy

All debtors want to keep as much assets and income as possible when they file for bankruptcy. Some assets need to be returned to creditors or trustees to pay secured and some unsecured debt.

Debtors with too much income must apply for Chapter 13 bankruptcy to repay part of their debt. Many items can be saved even in bankruptcy cases.

Some assets can be preserved because they are clearly protected by bankruptcy law. Other assets can be saved if the debtor makes the right arrangements. It may also depend on what state law provides.

Here are some frequently asked questions about saving assets. For more information about pensions, public interest, other items, and details about these items, consult with a bankruptcy attorney to maximize the items and income you can protect.

Can you save the house?

Yes. Chapter 13 Applying for bankruptcy and submitting a feasible reorganization plan should save your home. The main requirements are:

• Continue to pay monthly from the time you file a bankruptcy until the end of the line.
• Submit a plan to pay arrears over a period of 3 to 5 years and provide a small percentage to pay other debt. Then pay the bankruptcy trustee in a timely manner.

In some cases, you can renegotiate the loan, such as extending the payment or requesting a lower interest rate. There are several factors that creditors consider.

These include the amount of the loan paid, the length of the payment, the ownership of the debtor's house, and the value of the house.

The debtor also has a personal exemption at home. If you own a house with your spouse, your spouse [if your spouse has also filed for bankruptcy] may be able to add their exemption to the calculation.

The personal exemption is currently close to $ 23,000. For couples, the joint exemption is $ 46,000.

For some mobile homes and low-value homes [perhaps because they need a lot of repairs], debtors may be able to save on homes.

If the debtor cannot save the house directly through a personal exemption, if the house is worth more than the exemption, the debtor will get the cash value of the exemption when the house is sold.

Some state exemptions are higher than federal exemptions.

A good debtor's lawyer may advise the debtor to use a state waiver to save a home if the waiver is high enough.

Can you save the car?

Yes. The debtor agrees to continue monthly payments and can save the home in Chapter 13 bankruptcy by paying arrears over 3-5 years.

The debtor can save the house in Chapter 7 bankruptcy by submitting a reconfirmation contract. A reconfirmation contract means that the debtor agrees to pay for the car, even after other bankruptcy debt has been discharged. If the debtor is not in time to pay for the car, you can get it back.

The debtor can also use a personal exemption to store the car. The debtor has a $ 3,750 personal exemption under federal bankruptcy law.

If the debtor's share is less than the exemption amount, they should be able to keep the car. For example, if the car price is $ 10,000 and the loan amount is $ 7,000, the debtor's interest is $ 3,000.

The exemption exceeds $ 3,000, so the debtor can use the exemption to keep the car.

In addition to the $ 3,750 exemption, debtors can use the unused portion of their homestead exemption allowance. If you don't own a home, the Homestead allowance that you can use with personal assets like a car is $ 11,500.

Can you store furniture and jewelry?

Yes. In the same way that a debtor can hold a car [planning in Chapter 13, reconfirmation contract in Chapter 7 and using a personal exemption], the debtor can hold furniture.

The main difference is that the exemptions are different. The exemption for furniture, home appliances, books, pets, and household items is $ 12,250 unless an individual item is worth more than $ 575.

The value of the item is not what you paid for it, but if it is sold out, you can get after the cost of promoting the sale. Most household items are worth less than $ 575.

Jewelry exemption is $ 1,750. Many creditors will want to sign a reconfirmation contract because furniture rarely has value.

Similarly, the debtor only has to pay for the value of the furniture [not the entire loan] only when applying for the reorganization of Chapter 13.

There is also a wild card waiver slightly over $ 1,000, which can be used in addition to an individual item waiver plus $ 11,500 of the unused portion of the Homestead allowance.

Can I save trading tools?

Yes. The debtor may submit a reorganization plan in Chapter 13, enter into a reconfirmation contract in Chapter 7, or use an individual exemption. The personal exemption for trading tools is $ 2,300.

The unused portion of the Homestead exemption up to $ 11,500 can also be used to store trading tools.

Can I continue social security benefits?

Yes. Social security benefits are protected by federal bankruptcy law. Creditors cannot touch them. In addition, social security benefits are not considered in the average income test.

For example, many senior citizens are subject to Chapter 7 if they cannot pay for medical expenses.

Can I keep my retirement allowance?

Yes, in most cases. A typical retirement account is protected. Standard IRA and Roth IRA limit is $ 1,245,475

Can you maintain unemployment benefits?

Perhaps. Unemployment compensation benefits may be considered income or welfare benefits. It really depends on where you live and what the bankruptcy court in that place says.

Usually unemployment should be listed on the form. Many places use unemployment compensation as part of a means test.

Can I continue to pay for the disability?

Normal. SSDI [Social Security Disability Income] and SSI [Supplementary Security Income] are intended to help people who cannot earn income. For this reason, lump sums and monthly payments are usually protected. It is still wise to make sure that the bankruptcy attorney formally demands payment exemption.

Other disability benefits such as workers; compensation payments may vary from state to state. Most states prevent workers' compensation benefits from being paid to creditors. Workers' compensation benefits are usually part of the instrument testing process.