What property do I get to keep if I file for Bankruptcy?

What property do I get to keep if I file for Bankruptcy?

Often people believe filing for bankruptcy would result in a loss of all your assets and valuables. The Bankruptcy laws are not designed to strip you of all you have. In actuality, there are “exemptions” that are provided  which allow a person to keep most necessary and essential assets.

Real Property

In regard to your real property if your property does not have equity, you will be able to keep this property as long as you maintain the monthly mortgage payment.

If your home does have equity, you may still be able to keep your home if you qualify under the following exemptions:

1.      Automatic Homestead for any Debtor -$75,000.00

2.      The Debtor’s spouse or a minor dependent is living in the residence -$100,000.00

3.      The Debtor is a senior, disabled, or 55 years of age or older - $175,000.00

Personal Property

Once a person decides to file for bankruptcy several important questions arise. Can I keep my car, retirement, pension, furniture and jewelry?

You may keep the following, including but not limited to:

1. Wildcard of $23,250.00 - which can include Cash or funds in your savings or checking account. This section can also supplement other property such as a vehicle which the Motor Vehicle exemption would not cover entirely.  Code of Civil Procedure Section 703.140 (b)(3)

2. Motor Vehicle of $3,525.00 – this amount can be supplemented by the wild card and allow you to keep your motor vehicle even if it is above the amount of $3,525.00. Code of Civil Procedure Section 703.140 (b)(2)

3. Interests in IRA, ERISA, Keogh or other pension or profit sharing plans – no limit on the dollar value. Code of Civil Procedure Section 703.140 (b)(10)(E)

4. Life Insurance (un-matured) – no limit on the dollar value. Code of Civil Procedure Section 703.140 (b)(7)

5. Household Goods & Furnishings, personal clothing – no limit on the dollar value. Code of Civil Procedure Section 703.140 (b)(3)

6. Jewelry of $1,425.00 - this amount can be supplemented by the wild card and allow you to keep your jewelry even if it is above the amount of $1,425.00. Code of Civil Procedure Section 703.140 (b)(4)

Please note that there are other assets you may be able to keep which were not inclusive in this list, you can find these exemptions in the California Code of Civil Procedure or seek the advice of an experienced Bankruptcy Attorney.

Chapter 7 v. Chapter 13 Bankruptcy: Will I Get To Keep My Home?

One of the greatest benefits of bankruptcy is an automatic stay on all of your debt.  Once a bankruptcy petition is filed, an automatic stay prevents any and all creditors from doing anything to enforce a claim against a debtor and it temporarily suspends foreclosure action against your home.   

An important aspect to consider is whether the equity in your home is greater than the homestead exemption. 

California has an Automatic Homestead Protection exemption that allows you to maintain your home if your equity is  as follows:

·         Automatic Homestead for any Debtor: $75,000.00

·         The Debtor’s spouse or a minor dependent is living in the residence: $100,000.00

·         The Debtor is a senior, disabled, or 55 years of age or older: $175,000.00

If the equity in your home is greater than any of the examples illustrated above, Chapter 7 bankruptcy would probably not be the best decision. You may be forced to sell your home and pay off  your existing debts if you do not qualify under the Homestead exemption. Chapter 7 bankruptcy laws provide that if you have equal to or less than the Homestead exemption or no equity in your home, you can retain the property if you continue to make timely payments.

                               

If there is equity in your home but you have fallen behind on your payments, Chapter 13 might be a wiser decision.  Chapter 13 will allow you to continue to pay your mortgage and remain living in the home.  Keep in mind that if your home is in default, you will have to make mortgage payments timely in addition to another payment on the arrears.

If you are unable to maintain your mortgage payment, the bank can foreclose on your home after your bankruptcy discharge.  As such, immediately listing your home for a short-sale is more than likely your best option.  Statistics show that lenders are less critical of a person who took the option of a short sale rather than a foreclosure.

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Written by Kalsoom Tremazi