What Happens to My Property in Chapter 13?
Property of the Bankruptcy Estate
What you own is determined as of the day your bankruptcy is filed. Legally, your property becomes the property of the bankruptcy estate (the trustee controls the estate), as of the date of filing of your case in the bankruptcy court, subject to your claims of exemptions. It is very important that you have the assistance of an experienced, Colorado bankruptcy attorney to make the proper claims of exemptions. Whatever you acquire or receive, after the filing of bankruptcy, is your property and not the property of the bankruptcy estate, except property received by inheritance, life insurance proceeds, or division of property in a divorce, within 6 months of the date of filing.
Chapter 13 Plan - Amount for Unsecured Creditors
Chapter 13 bankruptcy is an arrangement to pay something to your unsecured creditors (like credit card companies, medical provides - creditors with no claim on collateral), if you have disposable income. If you have disposable income, you are forced into a Chapter 13 bankruptcy for 5 years, in which you will make monthly payments to the trustee. You may also need a Chapter 13 if you have non-exempt property that you would lose in Chapter 7, but want to keep. In Chapter 13 bankruptcy, you do not give up non-exempt property, but you have to pay its value to unsecured creditors. Non-exempt property is property that is not protected from your creditors. The law protects most property, because most of what you own is necessary for living: like a home, a car, food, household goods, tools of your trade, retirement funds, etc. What is not protected is a much shorter list.
In each case, we look for cash; cash in your pocket, in the bank, or under a mattress. The important question is, where did the cash come from? If cash comes from wages, 75% is protected; the trustee may take the other 25%.. If cash comes from a gift or loan, it cannot be protected. We will work with you to file your case when cash is low; if necessary, we will guide you in the spending of excess cash, before filing your case.
We also discuss your wages. We want to file your case at a time when your employer owes you the least, as we can protect only 75% of wages owed on the date of filing. Your wages owed after filing are not in jeopardy.
- Tax Refunds
Generally, tax refunds owed to you on the day of filing are non-exempt; the trustee takes 100%. However, any refunds that are Earned Income Credit or Additional Child Tax Credit are protected 100%.
- Luxury Items
Beyond cash, wages, and tax refunds, non-exempt property will consist of luxury items, such as: sporting goods, RVs, boats, trailers, airplanes, 2nd homes, timeshares, collectibles, investments that are not within a retirement fund, etc. You will want to work with an experienced, Colorado bankruptcy attorney to plan for your bankruptcy, to sell non-exempt property, and use the proceeds of sale appropriately for your benefit and not for the benefit of your creditors.
All of your property will be disclosed in your bankruptcy documents, along with claims of exemptions. The trustee will have an opportunity to ask you about your property, at the creditors' meeting, and will have 30 days to file an objection to your claims of exemptions. The trustee will require that you pay to your unsecured creditors an amount equal to the value of your non-exempt property. This amount will be part of your total plan payment. Once the Chapter 13 plan is approved by the court, all property is once again yours, to do with whatever you wish.
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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