What Property May I Keep Under Chapter 7

Are you considering filing for bankruptcy? If so, you might have images of repo men coming into your home, taking your possessions, selling them to the bank, and leaving you empty-handed.

Although bankruptcy may look like this in cartoons, in reality, some laws guide and protect your properties during bankruptcy. These laws or protections are called bankruptcy exemptions. When examining bankruptcy, we cannot but discuss the concept of Chapter 7 and the properties you may keep under chapter 7. 

So, do you often question yourself about what properties to keep under chapter 7? You have landed on the right page! In this article, we will broadly discuss the properties that should be kept under chapter 7. So, without further talk let’s delve into it!

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy exists to help people bounce back on their feet and regain control of their finances. To make this easy, the government developed a set of exemptions, allowing individuals to maintain their quality of life while resolving their issues with creditors.

Thus, if your property is exempt, you can keep it after filing for bankruptcy. However, if it is the opposite, your bankruptcy trustee may sell it and divide the proceeds among your unsecured creditors.

It is noteworthy that most of the Chapter 7 bankruptcy exemptions have a limit. This means anyone filing for bankruptcy can protect certain types of property up to a certain amount. For instance, should your car be worth $4,500, and the exemption for motor vehicles in your area is up to $6,000? You will be allowed to keep your vehicle due to its value, which is lower than the exemption amount.

However, if your vehicle was worth $10,000, your trustee could sell the vehicle for $10,000. They would then give you the $6,000 that is protected by an exemption and divide the remaining $4,000 among your creditors. 

This said, let’s discuss the various properties that you can keep under Chapter 7 below.

What Properties Can You Keep under Chapter 7?

Although every state’s Chapter 7 bankruptcy exemptions are a little different, most common types of property are usually protected. However, collectibles, vacation homes, and investments are less likely to be exempt. Chapter 7 bankruptcy exemptions vary by state and federal laws, so the listed below are only rough guidelines. 

For more specific information, you may research the laws in your area or consult with Chapter 7 bankruptcy lawyers. Chapter 7 bankruptcy lawyers are usually dedicated to helping their clients explore all of their alternatives before determining the most effective way to take control of their finances. In addition, they also represent their clients in court.

So, some of the common properties usually protected include the following:

Houses, Cars, and Properties Encumbered by a Secured Loan

If you own a car, house, or expensive household furnishings, chances are you took out a loan to purchase them. Normally, your lender is entitled to the security interest in the property. This implies that if you fail to make your payments, the bank may take back your car or furniture or foreclose on your home.. In most cases, this security interest is not affected by bankruptcy. 

Since bankruptcy does not obliterate insurance interests, the bankruptcy trustee is only concerned with how much capital you have in the property. So, whether a trustee will sell your property depends on the amount of capital or interests you have in the property and the exemption laws of your state. 

Household Goods and Clothing

Your household goods and clothing usually are fully exempt in your bankruptcy (meaning they are kept under Chapter 7), because they typically have little resale value. However, if you do have individual items of high value and are unable to exempt them, then the trustee may sell them.

Wildcard Exemptions

Federal bankruptcy law has a wildcard exemption for individuals filing any kind of bankruptcy. Some states have wildcard exemptions as well. The major purpose of a wildcard exemption is to protect things that are significant to you but don’t necessarily fit into one of the existing categories. 

Wildcard exemptions can be used to protect unique valuables, including family heirlooms, collectibles, wedding dresses, or artwork. In addition, the wildcard exemption can also be added to the exemption limit of another category. 

For instance, say your vehicle’s equity is just over the exemption limit in your area. In this scenario, you could add your wildcard exemption to protect the value of your car that’s over the vehicle exemption limit.

Retirement Accounts

Welfare benefits and retirement accounts are almost always protected provided that you list them on your paperwork. Most retirement plans, unemployment benefits, disability benefits, and veteran benefits fit into this category. So, you will usually be allowed to keep all of these savings. 

That said, if you have a lot of money saved in any of these accounts, it is advisable that you talk to an attorney. You can also Learn about 401k accounts in bankruptcy. Additionally, it is noteworthy that wages earned before your filing date but won’t receive until after filing your case are usually partially protected. Any post-bankruptcy earnings are completely exempt from a Chapter 7 filing.

When Can You Keep a Non-Exempt Property?

More often than not, people ask this question. You can keep a nonexempt property when:

• The trustee abandons the property.
• The property is upside down i.e. when it is secured.
• You have the costs of sale and the trustee’s commission.
• There’s an exchange of exempt property or assets for nonexempt property.

Conclusion 

Concisely, Chapter 7 bankruptcy exemptions allow you to protect property during your bankruptcy. Often, these exemptions allow you to keep a significant chunk of your day-to-day property. The more effort you invest in learning your exemption laws, the more your chances of keeping a significant amount of properties during your bankruptcy. 

However, before submitting your filing, ensure you take the time to conduct in-depth research on your exemption rules or speak with an attorney at law or an attorney for small claims about how exemptions can protect the property you care about the most.

Hopefully, this article has provided you with a crystal clear understanding of what Chapter 7 is and the properties you can keep under it.