People asking about bankruptcy attorney services often worry they'll be left with nothing when they're done with the process. The truth is significantly different, though. If you're trying to figure out what you'll likely be able to keep, a bankruptcy lawyer will want you to be aware of these four things.
The Kind of Petition Matters
Bankruptcies fall broadly into one of two categories, restructuring and liquidation. When you restructure your debts, the creditors take a haircut on the total you owe. However, you'll still pay a percentage based on what the court says is right. Conversely, in the liquidation process, the court wipes out all debts.
Folks restructuring their debts usually can hold onto all their assets. If you're restructuring under Chapter 13 or 11, there's a good chance you will keep everything. However, people using the liquidation process in Chapter 7 must sell all their non-exempt assets to pay the creditors whatever they can.
Exempt Assets
Notably, there are a lot of different types of exempt assets. The most obvious ones are assets essential to your daily life. For example, a judge isn't going to make you sell every plate and spoon you own. Unless your plates and spoons are rather luxurious, the court probably won't care about them at all. A similar logic applies to clothing, furniture, and other everyday items.
Similarly, you have the right to assets that help you earn money. Most people can claim a practical car for daily driving, for example. If you're a contractor, there's a good chance you can keep your tools.
All states have to conform to the federal guidelines that allow the above exemptions. They can't ban a particular exemption if the feds allow it. However, a state can allow more exemptions. For example, some states allow exemptions up to a certain threshold. In theory, you could hold onto true luxury items as long as your total exemption claim doesn't exceed the state's limit.
Primary Residence
If you own your primary residence outright, a bankruptcy attorney can ask the court for an exemption for it. However, if the residence is collateral for a mortgage, loan, or line of credit, then it isn't exempt in Chapter 7. You may be able to include a mortgaged primary residence in a Chapter 13 restructuring, though.
Ability to Sell
The court will appoint a trustee to sell assets for petitioners in Chapter 7. Even if an asset is non-exempt, the trustee may determine it's not sellable. In that scenario, you can usually keep the asset.
Contact a bankruptcy attorney for more information.
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