Property Assessment During Bankruptcy

Property Assessment During Bankruptcy

The two things you will consider in trying to avoid bankruptcy are whether you can cut your expenses and whether you can sell any assets to pay off some of your debts. The best way to start this process is by completing a property assessment.

To put it simply, property is something you own (such as money, a house, a car, or furniture) and a debt is money you owe. Property may also be referred to as an asset. There are several different types of property and debts involved in a bankruptcy.

Property is divided into exempt and nonexempt categories. Remember, the purpose of bankruptcy is to help you start over financially. It would not be helpful to leave you without any property, so the bankruptcy laws allow you to keep a certain amount of your property. The types and amounts of property you are allowed to keep are exempt property. The type and amount of property that is exempt is a matter of state law (and alternative federal law, in some states).

Although the Bankruptcy Code is a federal law, the question of exempt property is generally determined by state laws. Most states exempt the following types of property, at least up to a certain value or amount:

  • motor vehicles
  • clothing and personal effects
  • household furnishings
  • tools used in your trade or profession
  • equity in a home
  • life insurance
  • public employee pensions
  • Social Security, welfare, unemployment, workers' compensation, or other public benefits accumulated in a bank account.

Typical examples of nonexempt property are:

  • a second car
  • a boat or recreational vehicle
  • a vacation home
  • cash, bank accounts, certificates of deposit
  • other investments, such as stocks, bonds, or coin collections

Note: Even if the property is exempt, you may still lose it if it is tied to a secured debt. For example, your home is exempt property under your state's laws. If you borrowed money from a bank to buy the house, and the bank holds a mortgage on the house, the bank can still foreclose and take your house if you do not pay.

  • Introduction to Bankruptcy
    Do you need a fresh financial start? Are you being hounded by debt collectors? You are not alone. Almost 1.5 million individuals file personal bankruptcies every year in the U.S. It has been a long-standing element of American law that an individual can file for bankruptcy and obtain a fresh start...
    read more
  • Types of Bankruptcy
    For individuals, there are two basic types of bankruptcies : chapter 7 and chapter 13. An individual may file for bankruptcy under Chapter 7, which is sometimes called "fresh start" or a "liquidation" bankruptcy. In a Chapter 7 bankruptcy, an individual may keep certain kinds of property (called "...
    read more
  • Who Can File For Bankruptcy?
    Generally, anyone can file for bankruptcy. However, not everyone qualifies to file for a particular kind of bankruptcy. If you are an honest person who can't afford to pay your bills, you can qualify for bankruptcy. If you have previously filed for bankruptcy, it may affect your options. For...
    read more
  • The Process
    There are eight common elements in obtaining a bankruptcy discharge (i.e., eliminating or reducing your debts, or planning their repayment), although the details of these may vary depending on your situation. The attorney you find through LegalZoom will help you with the entire process which takes...
    read more
  • Pre-Bankruptcy Credit Counseling
    Before you can file for bankruptcy, you must first consult a nonprofit credit counseling agency approved by the United States Trustee's Office. This consultation may show you if there are alternatives bankruptcy that would work for you.
    read more
  • Bankruptcy Reform
    Congress changed the bankruptcy laws significantly in 2005, making it more difficult for individuals to file for bankruptcy. However, bankruptcy relief remains available to those who qualify. Some important elements to the revised bankruptcy laws are:
    read more