My clients often become concerned when I tell them that we must list all of their property in the bankruptcy petition. The common fear is that they will lose their property. This is dangerous misconception, as it sometimes keeps people from filing when bankruptcy is their best option. The internet and bad information lead many scared individuals into my office.
To some degree, it is an understandable fear. If you are wiping out your debt, and in many cases not repaying any creditors, it may make sense to believe you must surrender property as a penalty. However, this could not be further from the truth. The Bankruptcy Code is designed to allow individuals a fresh start and the chance to get back on their feet.
Personal property and real estate are protected in bankruptcy with "exemptions". Exemptions, in short, "exempt" your property from your creditor's reach. These exemptions fall under state and federal law, and while they are usually not unlimited, they are normally sufficient to protect all of a bankruptcy filer's property. Exemptions can protect a wide range of property, from equity in a home, to personal items, cars, and retirement accounts. The categories are too broad to list. It suffices to say, if you own something, it can be exempted from your creditors.
However, in order to exempt and protect your property, you must first list it in detail. This is done in Schedule "B" of your bankruptcy petition. The detail required is not excessive... you do not need to list individual personal items. You don't need to catalog every last piece of silverware and every sock and t-shirt in your drawer. However, you must list large items (such as homes, cars, and retirement accounts) in some detail, and you must determine an estimated value.
The purpose of this list in Schedule "B" is NOT to provide your creditors a shopping list of things to go after. Quite the opposite, the purpose is to show what they CANNOT go after. This is because all of this listed property is exempted one schedule later in Schedule "C". In this way, your bankruptcy petition sets out what you get to keep, not what you must lose.
This all being said, the value of property owned by a debtor may sometimes exceed the exemptions, especially when it comes to the value of homes. In these case, Chapter 13 bankruptcy will still be an option. You will still be able to keep all of your property. You may, however, be required to make a repayment to some creditors. This can all be discussed in a free consultation. Contact us to set one up today.
I often tell my clients who are afraid they will lose something of value that, "I am not in the business of losing property of my clients." This is very true, but in order to be so, we need to list your property first. We list it so you can keep it!