You may be wondering what will happen to your assets while filing for Chapter 7 or Chapter 13 bankruptcy. What are your bankruptcy options, and what exemptions are available to protect your assets?
The first step of bankruptcy is filing a petition in federal bankruptcy court. You can file for Chapter 7 (liquidation) or Chapter 13 (reorganization) of the U.S. Bankruptcy Code. Among the debtors’ obligations when filing for bankruptcy, there is financial inventory that includes their assets, income, debts, and any applicable exemptions.
What is a Bankruptcy Estate?
The bankruptcy estate is a separate legal entity and is managed by a trustee. Almost all property you own or have an interest in when you file becomes part of the bankruptcy estate, except for exempt property. A bankruptcy estate is automatically created when you file your petition with the court. Creditors can no longer try to collect debts until the bankruptcy proceedings have concluded. Any payments to creditors will come from the estate.
How is a Bankruptcy Estate Administered?
A trustee is designated in both Chapter 7 and Chapter 13 bankruptcies to manage the nonexempt property of the bankruptcy estate. Their role and duties may differ according to the type of bankruptcy and the circumstances of each case.
In Chapter 7, the trustee’s role is to sell non-exempt property (liquidation) and distribute the earnings to pay off creditors. In Chapter 13, debtors will be put on a debt management plan to keep the specific property (house, car, for example), whereas they make payments from current income. In this case, the trustee manages the payments and supervises the debtor’s performance under the repayment plan.
What Assets are Property of the Bankruptcy Estate?
- the property you own that is in your possession;
- the property you own that is in someone else’s possession (an item you’ve loaned to a friend, for example);
- the property you’ve recently given away;
- the property you are entitled to receive;
- proceeds from your property (for instance, rental income or dividends)
- certain assets you receive within 180 days after filing (such as an inheritance or lottery winnings);
your share of marital property.
If you are considering filing bankruptcy to keep the creditors from seizing your assets, contact a Rio Grande bankruptcy attorney.