Can I Keep My Property in Bankruptcy?
Remember the bargain of bankruptcy? You pay as much as you can to your creditors, and then the balance of your debt is discharged, eliminated. As I discussed in a previous article, upon filing the bankruptcy case you must disclose all that you own: all of your assets, your property, along with your debts, income, and expenses. With everything that you own and earn on the table, your creditors and the bankruptcy trustee can determine what you are able to pay back.
Fortunately, in the bargain of bankruptcy, the law recognizes that certain property is necessary for living. You must have a home, transportation, tools of your trade, household goods, and comforts of living. These necessities of life are protected from your creditors and the bankruptcy trustee by exemptions. Exemptions are laws that prevent your creditors from taking the things that are basic to a reasonably comfortable life. As part of your initial bankruptcy filing, along with a listing of your property, is a listing of those things that you claim as exempt, that you claim should be protected from the bankruptcy trustee and from your creditors.
The bankruptcy trustee will have an opportunity to review your list of property and your claims of exemptions and, if he or she disagrees, the trustee can challenge your claims of exemption. If the trustee wants to object to your claims of exemption, that objection must be made within 30 days after the creditors’ meeting.
In chapter 7 bankruptcy, you will have to surrender to the bankruptcy trustee any property that is non-exempt, not protected by an exemption. In chapter 13, you may keep all of your property, but you must pay the value of non-exempt property to the trustee over a period of 3 to 5 years.
In Colorado, the exemption laws are relatively generous. For example, the law protects $60,000 in home equity ($90,000 if you are 60+ years old or disabled), $5,000 in equity in autos ($10,000 if 60+ years old or disabled), $3,000 in household goods, 100% of retirement funds, $20,000 for tools of your trade, and $2,000 in jewelry.
In the bankruptcy bargain, the court determines what you are able to pay to the trustee and your creditors, after application of exemptions. In chapter 7 bankruptcy, most people lose very little to the trustee. In chapter 13, you keep all of your property, but what you pay to the trustee is based partly on your income and partly on the value of your non-exempt property.
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The statements of law made here are general statements of law, effective at the time published and subject to change from time to time. These statements are not intended, nor may they be construed, to be applicable to any particular set of factual circumstances nor to any particular person. I recommend that all readers seek the assistance and advice of an experienced bankruptcy lawyer for guidance in their particular circumstances.
© Copyright 2013 David C. Hoskins, licensed Colorado lawyer