How much property can I keep after filing?

Chapter 7

Every state has exemption laws that allow you to keep some necessities, even if you do not pay your creditors. The idea is that it would do little good to take all of your assets because you would not have a place to live, clothes to wear or a way to get to work. Most exemption laws allow you to keep clothes, household goods, a car of some limited value, tools of trade, as well as other property. Some exemptions allow you to keep some equity in a house.

In addition, bankruptcy law contains its own set of exemptions, which you can use when you are in bankruptcy, at least in some states. If you live in Arkansas, Connecticut, the District of Columbia, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, Texas, Vermont, Washington or Wisconsin, you can choose to use either the state or the bankruptcy exemptions, based upon your particular circumstances. One scheme may be great for one person, but horrible for another. An experienced bankruptcy attorney will be able to help you choose the appropriate exemptions.

As we described above, you must give all your non-exempt assets (the ones that do not fit within the exemptions) to the bankruptcy trustee. The trustee will then sell these assets to pay a portion of your pre-petition debts. However, many people do not have property in excess of the allowed amount of exempt property, and if that is the case, you do not need to surrender any property. Despite the exemptions, you always need to pay debts owed to Secured Creditors in order to keep the collateral securing the debt. Your exemptions do not affect their claims.

Chapter 13

Most people who file for Chapter 13 keep all of their property. In exchange for keeping their property, however, they commit to repaying a portion of their debts under a three- to five-year repayment plan. The plan will include payments to your secured creditors (creditors who took collateral for their loans, such as car lenders).

You may use a chapter 13 to save your home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as you file bankruptcy. Chapter 13 allows you to catch up on overdue pre-petition payments over time, while keeping up with current payments.