Your Property in Chapter 7 Bankruptcy

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A fresh start in Chapter 7 bankruptcy involves more than erasing qualifying debt—you’ll need property to maintain a home and job, too. Here’s how to figure out what you’ll be able to keep.

Each state has exemption laws that protect particular types of property from creditors. The basics, such as household goods and furnishings, dishes, bedding, clothing, a modest car, some equity in your home (except for in a few states), and an ERISA-qualified retirement account will be safe from their reach. Don’t count on finding exemptions for luxury items, however, such as recreational vehicles, antiques, expensive collections, or extravagant artwork. However, some states give filers a wildcard exemption to use on whatever they choose.

Federal exemption laws exist, too. Each state decides whether a filer must use the state system, or whether the debtor can use the federal exemption scheme instead. If you have a choice, you’ll decide which exemption set will work best for you.

If you own all of your property outright, your analysis will stop here. But if you’re still paying for some of your property, and you put the asset up as collateral for the debt (creating a “secured debt”), you’ll want to familiarize yourself with a few more issues. If you’ve financed a home, car, jewelry, electronics, furniture, or an appliance, it’s likely a collateralized debt.

You can always give the collateral back to the lender and wipe out the responsibility to pay for it. But if you want to keep it, you’ll need to pay as agreed (or negotiate new terms). Otherwise, the lender can use its lien rights to seize it once the court lifts the automatic stay prohibiting creditor collections.

Some Chapter 7 filers with secured debt can also take advantage of the ability to avoid judgment liens, enter into a new “reaffirmation agreement” contract, or pay less than the balance owed through a lump sum “redemption” payment.

Overview Articles

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Many people file for Chapter 7 bankruptcy protection and keep all of their property while getting rid of their debts.
What Happens to Jointly Owned Property in an Individual Bankruptcy?

This general overview explains that living in a community property or common law state affects how joint property is treated in an individual bankruptcy. However, only a local bankruptcy lawyer can explain how to protect your property.

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Whether you can keep your wages in Chapter 7 bankruptcy depends on when you earned the income and the exemption laws of your state.
How to Protect Your Bank Accounts in Bankruptcy

Learn how to use state and federal bankruptcy exemptions to protect cash and bank balances in Chapters 7 and 13, as well as steps to avoid losing funds when bankruptcy exemptions aren't sufficient or available.
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How Are Joint Checking Accounts Treated in Bankruptcy?

Learn what happens to joint accounts in bankruptcy and how much you must protect with a bankruptcy exemption in Chapters 7 and 13 when you don't own the funds.
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An anticipated tax refund is an asset in bankruptcy, and you might be entitled to a large refund if you qualify for earned income credit (EIC). Whether the trustee can go after your EIC depends on the exemption laws of your state.

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Protecting and Keeping Property in Chapter 7 Bankruptcy

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Learn how to use bankruptcy exemptions to keep your land in Chapter 7 and Chapter 13 bankruptcy.
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If a bankruptcy exemption covers the rental property equity and you can pay the monthly mortgage payment, keeping a rental in bankruptcy is possible. Learn why it's not as easy as it sounds.
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Protecting and keeping Other Assets in Chapter 7 Bankruptcy

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Learn about tax refunds in Chapter 7 or Chapter 13 bankruptcy, including how to protect them with a bankruptcy exemption when filing, and what to do if exemptions aren't available to cover the funds.
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