There is a common misconception regarding Chapter 7 Bankruptcy, that prospective filers fear they will end up losing everything when they file. This fear stems from people hearing that Chapter 7 requires people to give up all of their property to the bankruptcy court in exchange for all of their debt being wiped out. This fear is simply not true.
In a Chapter 7 bankruptcy, it is true that when you file, all of your assets and property, ranging from your home, a car, jewelry, and your furniture, become a part of what is called the “bankruptcy estate”. It is also true that the bankruptcy estate is “owned” by the bankruptcy trustee who is assigned to the case. However, just because your property and assets are included in the bankruptcy estate does not mean you are automatically going to lose everything. This is because each state has a set of “exemptions” that allow Chapter 7 bankruptcy debtors to keep up to a certain amount of assets; these dollar amounts apply to the property value and “exempt” them from being a part of the bankruptcy estate. Generally speaking, if certain property is exempt or qualifies for an exemption, it means you get to keep the property. Each state has different dollar amounts that apply to different types of property so an experienced bankruptcy attorney would be able to assist you with allotted amounts for each category of property you might own.
Placing a value on your property can become complicated, and some people may wonder how they are going to be able to place a value on everything they own. For some things, like a car, it is very simple to find the value; simply refer to Kelly Blue Book or NADA, and the price of your car, accounting for age and condition, is readily available to you. However, things like your family heirlooms, or your outdated computer, might be harder to place values on. The Bankruptcy Code requires that debtors value their assets and property at “replacement value”; this means what could you reasonably get for that particular item on the open market today. Many times, people get caught up in what they paid for the item when they bought it and forget to account for age and wear and tear. A good place to start when attempting to place a value on your property is to think about how much you could reasonably get for it on a secondary market (like a garage sale or websites like Craigslist or EBay).
You, as the debtor, are responsible for placing values on your property when filing for bankruptcy. In doing this, the bankruptcy court expects you to place these values in good faith. This means that you placed reasonable values on your property, and put in a fair amount of research into finding out the market value of your property. Although it is tempting to underestimate the value of property like your wedding rings, knowingly providing false information when filing for bankruptcy is perjury, which is a federal crime. It is typically better, when in doubt, to overestimate, rather than underestimate the value of your property.
If you have additional questions, please contact a St. Louis Bankruptcy attorney today!