If you are thinking about filing bankruptcy, you are probably worried about losing property when you file bankruptcy. You have probably heard horror stories where people have lost their homes, cars, and other belongings when they file bankruptcy. Although this does happen occasionally, if proper care is exercised in the filing of the bankruptcy, this should never happen.
I have filed well over 13,000 bankruptcies and not a single one of my clients has ever lost any property unless they wanted to.
Normally, when people hear about losing property in bankruptcy, they are hearing the story about someone who filed a chapter 7 bankruptcy. In chapter 7 bankruptcy, the trustee’s job is to liquidate, or take away from someone who has filed bankruptcy, property that is not protected by exemptions.
Exemptions are laws that allow us to keep property in a bankruptcy free of any claims of the creditors or the bankruptcy court itself.
To keep from losing property in bankruptcy, the attorney should take care to examine all of the property that you own in order to ensure that all your property is protected by the exemption laws.
Ohio’s exemption laws have been dramatically increased in recent years. Now, we have an exemption that protects over $10,000 and household goods and similar property. Over $3,600 in equity in an automobile is protected, and we can protect over $130,000 equity in your personal residence. Retirement plans are generally protected 100%. There are exemption categories for just about all of the property that anyone typically owns.
So, as you can see, it is possible in most cases to file a bankruptcy and not lose any property at all. However, some property is not protected.
For example, if you own rental property there is no specific exemption for equity in rental property. Also, if you have more than one automobile, your automobile exemption only covers one car. Therefore, there will not be any protection for the other car and you might lose that car in a chapter 7 unless you make arrangements to pay the trustee some money to keep it.
However, because chapter 7 is not the only bankruptcy chapter available to most people, loss of property is generally not necessary. When I see someone who has property that would be lost in a chapter 7, we always look to chapter 13 instead. In a chapter 13 you can pay some money to a bankruptcy trustee to be distributed to the creditors in a plan that can run from three to five years. In most cases this is an easy way to allow you to keep your property and not lose it
Proper exemption planning is the key to keep from losing property in bankruptcy.