How to Protect Property in Bankruptcy?

Consider Tenancy by the Entirety Protection

Though bankruptcy often results in losing all of one’s assets, protecting assets during bankruptcy is possible. Each state law provides its exemptions. Exemptions protect specific property types, like your home, vehicle, and personal belongings, from being sold to repay unsecured creditors.

Sometimes, these exemptions cover only partial value. In contrast, others offer full protection for an asset’s worth and “wildcard exemptions,” enabling one to shield any asset they need protection for.

As soon as a bankruptcy case begins, the court creates an “estate,” which temporarily becomes the legal owner of all property a debtor owns. A trustee appointed for each case is then responsible for liquidating nonexempt properties held within that estate and using proceeds from these sales to repay creditors.

Learn About Vehicle Exemption Options

While bankruptcy often results in the loss of assets, there is an effective way to shield yours via exemptions. Each debtor can claim individual state and federal exemptions, which cannot be combined in one bankruptcy filing.

• If the car exceeds the motor vehicle exemption value, a trustee would sell the asset, deduct sales costs and his/her fee from its sale price, and then distribute whatever remains as credits.
• If a bankruptcy trustee cannot generate enough income by selling non-exempt property, they may abandon it instead.
• This usually happens if they believe it would bring little in return from its sale – for instance, Harley was worth around $6,000, yet being sold would not generate enough funds to pay creditors.

Filers can prevent their financed asset from being liquidated before filing Chapter 7 by bringing it current and entering into a reaffirmation agreement with their lender to reaffirm it before that filing date arrives.