Options for Your Property When You File for Bankruptcy Protection
Chapter 7 bankruptcy gives you the opportunity to liquidate your debt and provides a “fresh financial start” at the completion of your case. Some people may mistakenly believe that they will lose all of their personal property when they file Chapter 7, but this rarely happens.
In fact, your personal property can be classified under two main categories. Terms you may hear in connection to this are “secured” or “unsecured,” or “exempt” or “non-exempt,” depending on who you speak to. After you determine which category your property falls into, you can decide which option to exercise. You may claim a personal property exemption, redeem the property or reaffirm the debt securing the property for the creditor. Bankruptcy rules require you to claim your property as exempt, redeem the property or reaffirm the property within 45 days of the first meeting of creditors. Here is a brief description of each of your options:
- Claiming personal property exemption — Exempt property is property the law allows you to exclude from your bankruptcy estate. You can use one of the state or federal exemptions to protect property from creditors or forced sale. An exemption can protect the entire asset or up to a particular dollar amount.
- Redeeming your personal property — Secured property that does not fall under one of the exemptions that you want to keep can be redeemed. Under the redemption option, you may make a single payment to the creditor for the replacement value of the property. Only personal (non- business), household property qualifies for redemption.
- Reaffirming your debt — When you reaffirm a debt, you agree to continue making payments on a secured property debt. Although this process allows you to keep personal and real property, such as a vehicle or your home, it can be dangerous. If you miss any scheduled payments under the agreement, the creditor can seek collection. You should be wary of creditors that try to coerce you into reaffirming unsecured debts.
The technical aspects of bankruptcy can be confusing, but an experienced bankruptcy attorney can help you through bankruptcy and ease your financial worries. Reach out to our office for more information.