I’ve been helping people with their financial issues for over three decades. So sometimes I take for granted what I think people may know about filing for bankruptcy. But it seems like
every day one of my potential clients says to me: “You mean I can keep that?” They seem surprised when I say “Yes.”
And I say that often. In fact, I say that almost always, no matter which type of bankruptcy might be the best solution, Chapter 7 or Chapter 13, even Chapter 11. So if you file for
bankruptcy, what are you allowed to keep?
Before I go there, a little background is necessary. Chapter 13 and Chapter 11 are reorganization-type bankruptcies that normally result in the client making payments on part or all
of their debt over a period of several years. Clients may have lots of things that they own, a house, cars, motorcycles, pension plans. And in almost all cases, our prepared Chapter 13 or Chapter 11 Court plan to pay back the creditors allows the clients to keep everything.
Chapter 7 is the type of bankruptcy where you eliminate unsecured debt without having to pay it. There are limits to the amount of property you can retain, but the limits, here in
Pennsylvania, are reasonable. It is possible that your situation may differ, and you may actually be allowed to keep more than I am about to write about, or (rarely) less, so it is always best to call
us at Steidl and Steinberg and speak with us directly about your circumstances.
So what can you keep in a Chapter 7? Start with equity in a home that you live in up to about $23,000 for each owner of the home, or $46,000 per couple. Equity is determined by
looking at the actual value of your home, that is, what someone would pay for it in today’s market, and subtracting the amount owed on the mortgages, home equity loans and lines of
credit, and any other liens that are against the house.
For example, if a married couple has a house worth $100,000 and has a mortgage of $40,000 and a home equity line of credit of $20,000, that would leave them with house equity of $40,000. Here is how that is calculated: Take the $100,000 value of the home and subtract the $60,000 of mortgages and equity loans. Since the married couple is allowed to keep up to $46,000 in house equity, they will be able to keep their house.
And with allowances for vehicles, household goods retirement plans, tools, even jewelry, plus a wild card that can be used for anything else, almost all bankruptcy cases result in
our clients being able to keep everything.
Surprised? Don’t be. And don’t be afraid to call us or write to us at Steidl and Steinberg for more information on your specific circumstances. The last thing you need is a surprise from
one of your creditors.