What Happens To Your Assets In Bankruptcy ?
Bankruptcy is the last option for anyone, struggling with debts.
It is a drastic process where your debts will either get paid off over a long period of time, or the debts will get forgiven and deleted from your name, depending on the chapter you are filing.
For the general consumers, there are usually two types of bankruptcy available! One is the Chapter 7 Bankruptcy, the other is the Chapter 13 Bankruptcy.
Both are different in their own ways, and both will affect your debts differently.
This post is however written to impart you knowledge about what happens to your assets, as you file bankruptcy.
Undoubtedly, after going through this post, you will be able to figure out more easily, as of which chapter you should file, when you are worried about losing your assets to the bankruptcy court and creditors.
Chapter 13 Bankruptcy, what it is, and what happens to your assets:
Most of the times, consumers are encouraged to file this chapter, as this helps to reorganize all the debts, and give a long time window for the debts to be rightfully paid off.
Even in this chapter, some or all the debts can be forgiven based on their priority levels. Chapter 13 bankruptcy can last from somewhere between 3 years to 5 years, from the date of filing.
And, to everyone’s relief, Chapter 13 doesn’t involve asset liquidation. This means, you get to keep your assets in this Bankruptcy.
But, in the end you will actually pay off your debts, so there’s no escaping from the debt accounts you are currently holding on to.
So, if you are eager to protect your assets in Bankruptcy, then Chapter 13 is surely your perfect choice.
Still, Chapter 13 can get a bit tedious, if you have too much of non-exempt assets. You will then have to pay values equivalent to your total non-exempt assets, for reimbursing your low priority creditors, those that are involving credit cards, personal loans, payday loans, and any other unsecured debts.
On the other hand, if you are having unpaid secured debts, and you want to avoid foreclosure, then you need to keep up with the payments, as per a new Chapter 13 repayment plan, designed by the bankruptcy court.
Overall, Chapter 13 will impose an automatic stay over you, which means no way can creditors induce collection efforts and foreclosure, during the tenure of bankruptcy. But, if you fail to make the timely payments, then the creditors or lenders can sign a motion of relief to the bankruptcy court, and begin debt collection by removing the automatic stay.
Normally, your assets are safe in bankruptcy Chapter 13, if you are regular with the new set of debt payments, through out.
Chapter 7 Bankruptcy, and how it affects yous assets or property:
This is the most active and aggressive bankruptcy chapter, that is available to you.
And yes, this chapter will do everything to take you out of your debt situation. Chapter 7 will liquidate your assets, if most of them are non-exempt.
Eventually, Chapter 7 will be the best option for you, if you believe that you can never pay off your debt balances, be it with or without a Chapter 13 repayment plan.
In Chapter 7, a bankruptcy estate will be formed, made up of your all non-exempt assets, by the bankruptcy court. This estate will then be handled by a bankruptcy trustee, appointed by the court.
The trustee will then liquidate or sell your assets from the estate to pay off your high priority creditors first. Then if any more property is left, then it will be processed to deal with the low priority creditors.
The main concern for most of the consumers, filing Chapter 7, is whether or not they will be able to keep their primary residence.
For your primary residence, if you have built enough equity that can be liquidated to pay off your creditors, then you will lose your home. This will depend on which state you are living, and how much equity you can exempt as per your state exemption rules, or federal exemptions rules.
Also, to be noted, any secondary dwelling property is falling under non-exempt asset straightaway.
This means, there are high chances, that you can’t keep secondary residences with you in Chapter 7.
This means, there are high chances, that you can’t keep secondary residences with you in Chapter 7.
Other properties like automobiles, jewelry, art collections, and so on, can also be sold off by the bankruptcy trustee.
But, with a no-asset Chapter 7 filing, you get to keep your assets.
A no-asset case is filed, when your equites on your assets are falling under state or federal exemptions. In that case, a trustee will not sell your assets, or will abandon the estate in its totality.
A no-asset case is filed, when your equites on your assets are falling under state or federal exemptions. In that case, a trustee will not sell your assets, or will abandon the estate in its totality.
Hence, take help of lawyers, before you file bankruptcy, to know what exactly your debt situation is saying, how much assets you can exempt, and which chapter sounds better for you.
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About the Author
Anthony W. Chauncey is highly qualified and dedicated in the areas of Bankruptcy, Foreclosure Defense, Criminal Defense, Traffic Citations, Family Law, and Personal Injury who can help you in your time of need.
