What Assets Will I Be Able To Keep In A Chapter 7 Bankruptcy?
For most assets, when you file a bankruptcy, you have federal exemptions or state exemptions. The benefit of the state exemption is that it allows a homeowner to exempt $500,000 worth of equity, or if you happen to be 62 and older, up to $1 million worth of equity. It also gives you certain exemptions like $7500 in motor vehicles and a certain amount in personal property. Nine times out of ten, people keep all of their assets. Trustees don’t come to the house, there is no money in it for them. Bankruptcy is very much a cash and carry system. If you happen to have a Picasso hanging on the wall, first off, you wouldn’t be filing for bankruptcy, but if you had to file bankruptcy that may be an asset that the trustee would have an interest in because it would probably not be fully exempt.
But even if there is an asset, the trustees only look for equity. When clients of mine have had equity that they could not exempt, the trustee’s path of least resistance is to offer the seller equity back to the debtor. I once had a client who had a house here in Newton and also on the cape. In Massachusetts, you can have only one homestead, and I suggested that he move to the house on the cape and his wife live here, and they each have a homestead. But like I said, no one listens to me, so we filed for bankruptcy. There was a certain amount of equity beyond the mortgages in the property on the cape, and the trustee sold it back to my client. My client happened to have a wealthy father that paid for it, but that’s what they hope to do because this way, they net some money putting it out to auction.
Do I Have To List All My Debts On A Bankruptcy Or Can I Pick And Choose Which Debts To Discharge?
In the United States, you need a credit card, but the problem is that debtors always leave out debt. I counsel them to look at it from a matter of what we are leaving out. Suppose you owe a couple of hundred bucks on a credit card, fine. If you owe several thousand dollars on a credit card, what are we accomplishing here? It makes no sense. I once had a client who, for business, needed his American Express Card. We filed personal bankruptcy, and he didn’t list American Express.
I told him some decades ago that you also have to list the others if you list out one credit card. Unbeknownst to you, they may be linked. So, let’s say that you have a Citibank card that you decide not to include in your filing, but you have a Barclays Card that you do. Sometimes Barclay will let Citibank know, and they’ll pull the account. I’ve told clients never to open up an account in the Bank of America because they can attach their account to anywhere they do their banking. So, in this case, he paid AMEX $3500 and filed for bankruptcy. AMEX said thanks for the payment, and we are closing your account after they found out about the bankruptcy and then amended the petition to add them. So, what I suggest people do is set a limit on what you are not willing to include.
If all else fails, and you no longer have any credit cards, you can find collateralized credit cards. There are companies online where you put $500 in a bank savings or checking account, and they give you a credit card with that for a credit limit. The other thing that I have discovered nowadays is that people who have been through bankruptcy, Chapter 7, for the most part, very often get solicitations for new credit cards, which gives them teaser lines of credit. If they make three timely payments, they increase their line of credit, and it’s not the end of the world, but if you are going to include a credit card, it should be one reason that it makes sense.
What Are The Main Differences Between A Chapter 7 And A Chapter 13?
I prefer a Chapter 7 even after COVID-19 has dashed the possibility of the social aspect of 341 meetings. If your income is such that you don’t have to file a Chapter 13, my recommendation is to file a Chapter 7. You’ll be surprised at how quickly life goes on. You don’t miss a beat, and it makes much more sense.
One of the differences between Chapter 7 and 13 is you are dealing with an attorney like myself who is a Chapter 7 trustee. They get paid $65 a case, and they may spend a little longer now because it’s done by phone, and it’s a more straightforward process. On the other hand, if it’s a Chapter 13, she is here on behalf of the government, and even though you’ll probably never hear from a creditor in any of these Chapter 13 cases unless there is a bank involved and a mortgage, she is watching out for the poor unsecured creditors. If the creditors don’t care, we have to send them notices.
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