Going through bankruptcy is a confusing and uncertain time for many people. As you sort through your options relating to the requirements, pros, and cons of filing for Chapter 7 bankruptcy in your state, you may be left with more questions than answers. One of the most important questions we get relating to filing Chapter 7 is the liquidation of nonexempt assets, especially when there are other parties involved. If you currently share a home with roommates, you may both be concerned about what happens to their belongings during the liquidation.
How Chapter 7 Bankruptcy Works
Filing for Chapter 7 Bankruptcy is seen as a way to start over with a clean slate. In Chapter 7, you are requesting that a judge discharge all non-dischargeable debts. Upon completion of your bankruptcy, you will no longer be responsible to repay those debts. In exchange, the court will likely require that you liquidate (sell) any of your nonexempt assets if any. Upon the liquidation of your assets, the court will distribute the proceeds to your creditors as partial satisfaction of your debts. After the benefits from the sale have been paid, the remaining portion of your debt (with some exceptions) will be included in the discharge.
Classifying Nonexempt Assets
During the proceedings of a Chapter 7 bankruptcy, you will provide the court with a list of all of your possessions, and the trustee will determine the value of your property to see if you have any nonexempt assets that are eligible to be liquidated. If they determine that you do not have any assets to liquidate, they will issue a report to the Bankruptcy Court stating that there will not be a distribution to your creditors. Each state has its own set of regulations as the limits of personal assets you are allowed to keep during your bankruptcy filing.
Should I Claim My Roommates’ Belongings?
No. If you did not purchase or do not own an item, property, or asset, you are not required to disclose it to the court. However, should questions arise as to the ownership of larger valued items, it’s in both your roommates and your best interest to have a way to show that you do not in fact own any part of those items. This includes receipts, bills of sale and more.
Knowing what to disclose during the filing of your bankruptcy can be difficult. Since each state and personal situation makes the process unique for each person filing, consulting with an attorney who is experienced in representing clients through their bankruptcies is the best way for you to make sure that you meet all the requirements of the Court and equally as important, ensure that your rights are being protected.