In order to repay a portion of their debts, excessively wealthy debtors must file for Chapter 13 bankruptcy. Even in a bankruptcy case, many items can still be preserved.
Certain assets can be preserved because they are expressly protected by bankruptcy law. Other assets may be preserved if the debtor makes the appropriate arrangements. Occasionally, it depends on the state's legal provisions.
Here are some frequently asked concerns regarding asset preservation. Consult a bankruptcy attorney for information on pensions, public benefits, and other items, as well as for specifics on these items, in order to maximize the items and income that you can protect.
Can my Home be Saved?
Yes. You should be able to keep your residence if you file for Chapter 13 bankruptcy and submit a viable reorganization plan. The primary requirements are as follows:
Continue making the monthly payments after filing for bankruptcy until the end of the line.
Submit a plan to repay the arrears over three to five years and offer a minor portion to pay off other debts. You must then promptly pay the amounts to the Trustee in Bankruptcy.
Occasionally, you can also renegotiate the loan by extending the repayment period or requesting a reduced interest rate. A creditor will take a number of factors into account.
These include the loan balance, the length of the payments, the debtor's equity in the property, and the home's value.
There is also a personal exemption in the residence for the debtor. If the home is owned jointly with a spouse, the spouse may be able to contribute his or her exemptions to the calculations (if the spouse also files for bankruptcy).
Currently, the personal exemption is close to $23,000. Joint exemptions for a married couple are $46,000.
For some mobile homes and low-value residences (possibly because they require extensive repairs), the debtor may be able to save the property.
If the debtor cannot save the home directly through personal exemptions, the debtor will receive the financial value of the exemptions upon the sale of the home, assuming the home is worth more than the exemptions.
Some state exemptions are more generous than their federal counterparts.
If the state exemptions are significant enough, a competent debtor's attorney may advise a debtor to use them to save the home.
Can I Save my Vehicle?
Yes. In order to save their home in a Chapter 13 bankruptcy, debtors must resolve to continue monthly payments and pay the arrears over three to five years.
Through the filing of a reaffirmation agreement, Chapter 7 debtors can save their residence. A reaffirmation agreement signifies that the debtor pledges to continue paying for the automobile after the discharge of all other debts. If the debtor fails to make timely car payments, the vehicle may be repossessed.
Additionally, debtors can use their personal exemptions to retain the vehicle. The federal bankruptcy law provides debtors with a $3,750 personal exemption.
If the debtor's equity interest in the vehicle is less than the exemption, they should be permitted to retain the vehicle. For instance, if a car is worth $10,000 and the loan is $7,000, the debtor has a $3,000 equity stake.
Since the exemption is greater than $3,000, the debtor can use it to retain the vehicle, provided he continues to make loan payments.
In addition to the $3,750 exemption, debtors may also utilize any unused portion of their homestead exemption. If you do not own a residence, you can use a $11,500 homestead exemption on personal assets like a car.
Can my furniture and jewelry be preserved?
Yes. In the same methods that a debtor can keep a car (Chapter 13 plan, Chapter 7 reaffirmation agreement, and use of personal exemptions), the debtor can also keep the furniture.
The exemption is the most significant distinction. The exemption for furniture, appliances, books, pets, and household products is $12,250, provided that no single item exceeds $575 in value.
The value of an item is not what you paid for it, but what you could sell it for after advertising expenses. The majority of household products are valued at less than $575.
The jewelry exemption is $1,750. Many creditors will want to engage into a reaffirmation agreement because furniture typically has little value.
Similarly, if they file for Chapter 13 reorganization, debtors are only required to pay up to the value of the furniture (not the entire loan) for any furniture they own.
In addition to the personal exemption and $11,500 of the unused portion of the homestead allowance, there is a tiny wildcard exemption of just over $1,000 that can be applied to any one item.
Can I save my professional tools?
Yes. Debtors may file a Chapter 13 reorganization plan, a Chapter 7 reaffirmation agreement, or utilize their personal exemption. The exemption for personal trade instruments is $2,300.
The portion of the homestead exemption that is unused, up to $11,500, may also be used to save trade instruments.
Can I continue to receive Social Security?
Yes. The Federal Bankruptcy Law safeguards Social Security benefits. Creditors have no access to them. In addition, Social Security benefits are not included in the income criteria.
If, for example, they cannot pay their medical expenditures, many senior citizens should be eligible for Chapter 7 bankruptcy.
Can I retain my Retirement benefits?
Yes, in the majority of cases. Standard retirement accounts are secure. Standard IRAs and Roth IRAs have a $1,245,475 limit.
Can I continue to receive Unemployment Compensation?
Maybe. The benefits of unemployment insurance may be regarded as income or as welfare payments. It truly depends on where you reside and what the local bankruptcy court says.
Generally, you are required to indicate unemployment on forms. In many locations, unemployment benefits will be included in the means test.
Can I maintain my Disability Benefits?
Usually. SSDI (Social Security Disability Income) and SSI (Supplemental Security Income) are designed to assist individuals who cannot work. Because of this, large sum and monthly payments are generally protected. It remains prudent to ensure that a bankruptcy attorney formally requests that the payments be exempted.
Other disability benefits, including workers' compensation payments, can vary by state. Most states prohibit the payment of worker's compensation benefits to creditors. Typically, worker's compensation benefits are subject to a means test.
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