What can I lose if I file for bankruptcy?

If you have considered filing for bankruptcy, it will be in your best interest to have a clear understanding of the potential consequences, along with the possible benefits. 

Upon successful completion, a Chapter 7 bankruptcy will wipe out a portion, if not all, of your unsecured debt in a short period of time. This chapter leaves you with a fresh start in less than a year. 

Chapter 13 bankruptcy is considered the “reorganization bankruptcy,” because it gives the petitioner the chance to reorganize their debt by agreeing to a 3-5 year payment plan that will pay off a portion of their debt to the collectors. This chapter offers the petitioner a chance to keep personal possessions they may lose otherwise in a Chapter 7 proceeding. 

Read on to learn more about the non-exempt assets that may be applicable for liquidation under Chapter 7, how secured property like your home is affected by Chapter 13, and what ways you can use to avoid losing your most beloved personal property in general as a filer. 

The best way to make the optimal decisions for protecting your assets is to hire a bankruptcy attorney. Know that there are experienced Florida bankruptcy attorneys available to help who have assisted hundreds of other Floridians like you with achieving the best possible outcome in a bankruptcy case. 

Non-Exempt Assets Under Chapter 7 Rules

Florida is one of the most generous states when it comes to asset exemptions. In most cases, the Florida homestead exemption protects your home regardless of what it is worth. While many states have caps on how much equity is protected in a primary residence, Florida is a rare exception. 

Many assets are generally protected under Florida’s generous statewide exemptions, but there are also a few liquidable assets that may be of great importance to you or your family. These are called the “non-exempt” assets, and they are eligible for acquisition by your case trustee. 

In a legal sense, non-exempt assets are deemed to be non-essential or luxury items that the petitioner can live without, as bankruptcy law is concerned with getting petitioners back on their feet, but at a compromise with the creditors. Creditors need an opportunity to collect a portion of the debt, without infringing on the petitioner’s basic necessities. 

Some items that may be considered liquidable in your bankruptcy petition include:

  • Valuable musical instruments not used as a primary means to generate income
  • Stock portfolios
  • Second cars
  • Vacation homes
  • Large collections of valuable goods

This may be an overwhelming list for some people considering bankruptcy, but there are still protective measures out there for you. 

Paying For Non-Exempt Assets 

One of the best ways to secure personal property that you are not willing to lose would be to buy it back, in a sense, from creditors. This process is known as a reaffirmation agreement. 

When a petitioner wishes to pay an agreed-upon portion of or the remaining total balance on a non-exempt item, the trustee will use that money to pay a portion back to the collectors, and the petitioner is allowed to keep their property without fear of liquidation. There were over 150,000 reaffirmation agreements made in Chapter 7 bankruptcy petitions in 2019, alone. 

This process must be recorded and approved by the bankruptcy court. They will usually only allow a reaffirmation agreement if it is in the best interest of the petitioner and they have the capability to repay it. This is a great way to keep certain non-exempt assets that you are not comfortable parting with, while still reaping the benefits of bankruptcy. 

Non-exempt property is a large gray area for bankruptcy, as the specifics vary case by case. If you are unsure about the best way to protect your prized possessions, you may find help by contacting a Florida bankruptcy attorney.  

What Is A No-Asset Bankruptcy?

The majority of Chapter 7 petitioners file what is called a “no-asset” bankruptcy. This type of filing declares that the petitioner does not have any valuable, non-exempt assets that are worth liquidation. This is a common occurrence, as only 7% of a petitioner sample filed their petition with liquidable assets. 

All filing procedures are the same regardless of the type of Chapter 7 bankruptcy you move forward with. Whether your petition falls under an “asset” or “no asset” bankruptcy will depend on if your paperwork proves you have unprotected assets that are applicable for liquidation. 

If you do qualify for a “no asset” Chapter 7, your unsecured debt will be discharged without any further duty to repay. It is important to note that not all non-exempt assets will be liquidated. All of this depends on the decision of the trustee to liquidate, and they could choose not to for many reasons. 

When Will A Trustee Abandon Property? 

There is a chance that you will be allowed to keep non-exempt personal property without paying for it. If the trustee has determined that the liquidation of your non-exempt asset does not bring a substantial payment for the collectors, they will abandon their claim to it, and the asset is yours to keep! 

Similarly, if the removal of the property from your possession will be more costly than profitable, a trustee may again make the decision that liquidating your property is unproductive and leave you to keep your asset. 

Find A Bankruptcy Attorney In Your Area Today

There is a lot to think about if you’re considering moving forward with a bankruptcy petition. The process can be overwhelming, but with the help of an experienced professional in the bankruptcy sector of law, you may be able to relieve some of your concerns. 

The team at Hoskins, Turco, Lloyd & Lloyd are excited to share our 35 years of experience with our community, and help Floridians like you get back on track with their finances, and never look back! 

Our bankruptcy team offers an initial consultation at your convenience, cost, and commitment-free. We’d love to help you through your petition! Contact us online or call (866) 930-6435 to schedule your free, confidential consultation.

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