Individuals who are considering filing for bankruptcy may wonder what will become of their personal property. Will things like their televisions, DVD players, and computers really be repossessed and sold to pay off creditors? The answer depends on the situation.
When someone files for Chapter 7 bankruptcy, also known as liquidation bankruptcy, that individual’s assets are sold to pay their debts. In exchange, the person receives relief from certain debts and a fresh financial start. Filing for bankruptcy doesn’t mean the person will lose everything, however. There are a number of bankruptcy exemptions that may apply, meaning some assets will be exempt from liquidation. In many cases, these exempt assets are enough to meet the typical person’s needs.
If a person has assets that are used as collateral to secure a loan, such as a car loan or a loan to buy jewelry, those assets are not protected and may be repossessed by the lender. Exemptions depend on the particular state law and generally apply only to items that are paid in full and owned outright. New York state exemptions include things like clothing, furniture, cookware, and other necessary household items worth up to $10,000. Anything over that amount arguably may be seized and sold but, in most cases, the bankruptcy trustee will look for assets that are more easily administered, like home equity, equity in vehicles, or bank accounts.
Before filing for bankruptcy, it is important to speak to an experienced bankruptcy attorney who can help you understand what debts can be discharged in bankruptcy and what property can be protected. Advanced planning is important to protect as much of your personal property as possible under the bankruptcy exemptions.
Source: FOX Business, “Will Bankruptcy Creditors Take Away my TV?,” Justin Harelik, Dec. 4, 2012by