When thinking about a bankruptcy case, most people focus on the owed debts. When I, Bankruptcy Attorney Carmen Dellutri of The Dellutri Law Group, start my analysis of a potential consumer bankruptcy case, I focus on the assets. More particularly, my attention hones in on the exempt assets and the non-exempt assets, if any.
The reason I look at a person’s assets is that I need to know if I can protect all or most of the assets before ever talking to the client about filing a consumer bankruptcy case. If I cannot protect all or most of their assets, why would I even consider discussing the bankruptcy option with them? I would instead spend more time discussing other strategies.
Keeping Assets Off the Table
Exempt assets are assets that are protected under federal and/or state law. Think of it this way, before a person enters the bankruptcy court, imagine they put all of their assets on a huge table to the right of them. If they own a home, the house goes on the table. If they own a car, the car goes on the table. If they own clothes, the clothes go on the table. If they own a dog, the dog goes on the table. You get the point. As their attorney, I am standing right next to the table. It is my job to remove as many assets from the table as the law allows me to do.
It is my goal in every Chapter 7 bankruptcy case to remove all the assets from the table so that my clients know going into their Chapter 7 bankruptcy case that all of their assets will be protected from the creditors. Unfortunately, I cannot do that in all cases. But, in those cases where their assets may be subject to creditors’ claims, at least my clients know what they are facing.
For example, let’s say that my clients own a home, and they are each allowed to protect $1,000 in personal property. In this example, let’s say that the clients have a combined $3,500 worth of personal property. If each is allowed to protect $1,000 in personal property, that would leave $1,500 of personal property on the table. This $1,500 is what their creditors would be allowed to share in a normal Chapter 7 bankruptcy case.
The same is true in a Chapter 13 bankruptcy case whereby we are adding up the value of the non-exempt assets and making sure that we are paying our creditors through the Chapter 13 plan at least as much as they would have received in a Chapter 7 case. If the same people in the example above filed a Chapter 13 bankruptcy, they would have to pay a minimum of $1,500 to their unsecured creditors over the life of the Chapter 13 plan for it to be feasible. In both cases, the nonexempt assets are treated the same, as we are looking at what the value of those assets is, but the repayment to the creditors is different.
If you are thinking about filing for bankruptcy protection and you have a substantial amount of assets, please feel free to contact us to schedule a complimentary strategy session. Our certified bankruptcy experts will be glad to assist you in determining whether bankruptcy is the proper option for you, and if so, what chapter you should file under. If bankruptcy is not a good option for you, we will discuss alternatives and answer all of your questions, so that you can make the best financial decision for you and your family.