By St. Louis Bankruptcy Attorney Tobias Licker
Bankruptcy will wipe out your debt such as credit card and medical debt. If you find yourself in a situation where you are under a mountain of debt, filing for bankruptcy will provide you with almost immediate relief. While going through bankruptcy can help with your debt problem, it is advisable to have an experienced bankruptcy attorney to make sure you don’t lose any of your property. Because of the many misconceptions surrounding bankruptcy, most people think that you lose everything you own when filing for bankruptcy protection. In reality, the law provides certain protections in place to help consumers keep much of what they own. Bankruptcy planning, that means determining when to file bankruptcy, under which chapter, and transferring or not transferring property before filing, could save money or jeopardize the whole bankruptcy case.
Type of Bankruptcy
The type of bankruptcy that you file will have a big role in what type of property you could lose. If you file for Chapter 13 bankruptcy, you will not risk losing any of your personal property. With this type of bankruptcy protection, you just enter into a repayment plan with your creditors, which is overseen by the court and the chapter 13 trustee. If there is non-exempt property, you can continue to keep it and pay the non-exempt portion as part of your chapter 13 plan payment. No property will be “liquidated” or taken from you.
If you file for Chapter 7 bankruptcy, then you could risk losing some property if not all of your property is exempt. Your bankruptcy attorney will be able to advise you in your free consultation whether you have non-exempt property. In some situations however, unexpected assets can occur that was not anticipated when filing of the bankruptcy petition. For example an inheritance will be part of the bankruptcy estate for 180 days after filing your bankruptcy case. We see this situation every so often in our office in St. Louis, Missouri. A client inherited money or property and will have to share the non-exempt portion of the inheritance with the chapter 7 trustee. The best advice in such a situation is to cooperate with your bankruptcy attorney and trustee. You cannot transfer the property without court permission because it is technically part of the bankruptcy estate. If you case is already discharged and closed, you still have the obligation to inform your bankruptcy attorney and trustee.
If the non-exempt property is of great value, the chapter 7 trustee could sell it. However, in almost all cases, debtors don’t lose any of their property. Almost all of someone’s property can be exempt. The money that is generated from the sale is used to repay your creditors. The portion that is not being paid will be wiped out at the end of the chapter 7 bankruptcy case.
What exemptions you can apply to your property depends on the state you live in. Every state has specific rules about property which you can claim as exempt from the bankruptcy proceedings. This means that anything that is considered to be exempt cannot be taken by the court or your creditors.
When your bankruptcy attorney prepares your bankruptcy petition, you will list all of your property that for which your lawyer will apply the exemption. The trustee will review the paperwork to make sure that everything is in order and correct exemptions are used. The trustee will not apply unused exemptions to your case if exemptions are not properly applied. If the trustee files an objection to exemptions and prevails with it, most often the court does not allow you to “re-arrange” exemption when they were not applied correctly in the first place.
There are many different pieces of property that you own which could be considered exempt. The rules from each state vary, so the exempt property in one state will not be the same as in another. Most states will provide you with some kind of exemption for a certain amount of equity in your house. In Missouri and Illinois where our office practice, have a $15,000 homestead exemptions to protect equity in your home. You should also be able to keep any tools that you have for your business up to a specific amount and one car up the value of $3000 in Missouri and $2,400 in Illinois. Clothing, personal items, jewelry, household furnishings, pension, IRA, 401(k)s are almost always protected in a chapter 7. If you live in the St. Louis, St. Charles, Florissant, or Metro East area and have questions about filing for bankruptcy, please do not hesitate to contact us. Our office offers a free consultation.