We get a lot of questions concerning assets, so I thought I would provide a simple framework for analyzing how assets are, and can be, dealt with in BK.
The chapter 7 trustee is primarily concerned about your assets and the value of those assets, i.e. the equity in those assets. An asset's value is its quick-sale, fair market value. An asset has equity if the value of the asset exceeds any loan or lien that is attached to that asset. If you have no loan or lien against the asset, the value of that asset equals its quick-sale, fair market value.
If the debtor has assets, those assets fall into 2 categories.
1. Exempt
2. Non-Exempt
Exemptions protect the "value" of the asset from being used to pay back your creditors. So, for example, if your state has a $5,000 Automobile exemption and your car is only worth $5,000, the value (or equity) in your car is exempt for BK purposes.
If you have Non exempt assets, you have 5 choices.
1. Before you file BK, sell the asset and spend the money. (there are caveats to this option, you must sell the asset for quick-sale, Fair market value, and you need to spend the money reasonably, i.e. necessary living expenses).
2. Before you file BK, Borrow against the asset and spend the money. (same caveats as for option 1).
3. File Chapter 7 and surrender the asset
4. File Chapter 7 and redeem the asset from the trustee (i.e. buy the asset back from the trustee.)
5. File Chapter 13 and retain the asset.
Asset issues in BK don't really get more complicated than that. What complicates matters in BK are the debtor's emotional, and often unreasonable, attachment to their "things".
Aside from a tax refund, there usually is no reason anyone should be in a chapter 7 asset case.
The chapter 7 trustee is primarily concerned about your assets and the value of those assets, i.e. the equity in those assets. An asset's value is its quick-sale, fair market value. An asset has equity if the value of the asset exceeds any loan or lien that is attached to that asset. If you have no loan or lien against the asset, the value of that asset equals its quick-sale, fair market value.
If the debtor has assets, those assets fall into 2 categories.
1. Exempt
2. Non-Exempt
Exemptions protect the "value" of the asset from being used to pay back your creditors. So, for example, if your state has a $5,000 Automobile exemption and your car is only worth $5,000, the value (or equity) in your car is exempt for BK purposes.
If you have Non exempt assets, you have 5 choices.
1. Before you file BK, sell the asset and spend the money. (there are caveats to this option, you must sell the asset for quick-sale, Fair market value, and you need to spend the money reasonably, i.e. necessary living expenses).
2. Before you file BK, Borrow against the asset and spend the money. (same caveats as for option 1).
3. File Chapter 7 and surrender the asset
4. File Chapter 7 and redeem the asset from the trustee (i.e. buy the asset back from the trustee.)
5. File Chapter 13 and retain the asset.
Asset issues in BK don't really get more complicated than that. What complicates matters in BK are the debtor's emotional, and often unreasonable, attachment to their "things".
Aside from a tax refund, there usually is no reason anyone should be in a chapter 7 asset case.
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