What Assets Can You Keep in a Chapter 7 Bankruptcy?
If you are contemplating filing a Chapter 7 Bankruptcy, you probably realize that the laws are surely not going to let you keep all kinds of valuable assets. You might have heard that, more specifically, there is a limit to what types, and dollar amounts, of assets you are allowed to keep and still qualify for a Chapter 7. But let’s get even more detailed with this issue, because to file a petition in Bankruptcy, without first knowing precisely how your assets will be treated, is nothing short of a recipe for disaster. Here, then, are the exemption limits for the most common types of assets for a single filer, bearing in mind that the figures should be exactly doubled to determine the limit for joint filers:
o Residential real property: $20,200
o Motor Vehicle: $3,225
o Household goods and furnishings: $10,775
o Audio, Video, and computer equipment: Included with household goods
o Clothes included with household goods
o Jewelry $1,350
o Cash, Checking/Savings accounts $1,075 (“Wildcard”)
o Tools of Trade $2,025
o Retirement Accounts, 401K, 403b etc. unlimited if ERISA qualified
The above list is by no means exhaustive; for sake of brevity we’ll limit ourselves to just these more common asset categories.
Now this begs the obvious question, what happens if I have assets with values in excess of these exemption limits? Needless to say, be sure to discuss with an experienced bankruptcy attorney before you decide whether it’s advisable, under such circumstances, to even file in the first case. Because if you do, the trustee may, in his discretion, “administer” the asset by selling it, and remitting to you an amount equal to the exemption limit. For example, if your car is worth about $8,000, the trustee may take and sell it, remit to you the amount of your exemption limit for the car (i.e. $3,225), and distribute the remainder (roughly $5,000 in this example) to your creditors.
Alternatively, the trustee might allow you to “buy back” the assets he would otherwise administer by paying to him the amount by which the asset’s value exceeds the exemption limit. In our example, you might be required to pay to the trustee roughly $4,800 in order to be allowed to keep the vehicle. Now since you probably don’t have $4,800 laying around (if you did, you probably wouldn’t be in bankruptcy in the first place), the question arises: Over what time period would the trustee allow you to pay the $4,800? The answer is probably not more than a few months, maybe six at most, inasmuch as the trustee will not want to add ‘receivables management’ to his already lengthy list of duties.