One of the biggest misconceptions about bankrputcy is that the Banruptcy Court will take your house, car and belongings when you file and sell them to pay your creditors.
The truth is that most people who file for bankruptcy keep everything that they owned before they file.
This is for several reasons:
1) All states have either state exemption laws or federal exemption laws that allow you to keep your belongings.
Pretty much anything you use on a daily basis, clothes, furniture, your TV, computer, etc. will remain in your possession. Most states also have a homestead exemption that protects at least a portion of the equity in a house, and also an exemption for a vehicle, although these exemptions vary from state to state.
2) Even if an item of property is not specifically exempt from seizure, many times the item is not of a value that would make it worth the Trustee’s time and effort to seize it and sell it. In legal terms, the property is “not worthy of administration”.
3) Secured debt such as a house or a car has a lien on it. Therefore, for a Trustee to sell a house or a car to benefit your unsecured creditors, there would have to be enough equity in the house or car to pay off the secured creditor and still justify selling the property for the unsecured creditors.
Also, for many people these days, they may have little equity or no equity in their house and or their car. The legal term for this is that the property is “encumbered beyond its value”.
Get the facts. I am available to answer your questions about bankruptcy and creditor questions.
