How Do I Save My Assets During Bankruptcy?
- 1). Understand the difference between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy is known as a "straight" or "liquidation" bankruptcy in which you may have to surrender assets in exchange for your discharge. However, you are allowed to exempt a certain amount of assets in a Chapter 7. In a Chapter 13 bankruptcy you get to keep your assets but must make payments to creditors over a 3- to 5-year term. This may be a better option for you if you have substantial assets.
- 2). Research your state exemption levels. Although bankruptcy is a federal procedure, each state determines its own property-exemption levels. For example, one state might allow you to keep $5,000 of value in a motor vehicle while another might only allow a $3,000 exemption. Any amounts over the exemption levels must be forfeited to your creditors via the bankruptcy court.
- 3). Complete Schedule C of your bankruptcy petition. Even if your state permits you to exempt certain assets, if you fail to cite the correct law exempting your property you will lose it. Each state's bankruptcy court publishes the most recent exemption levels.
- 4). Work with an attorney. Although you are allowed to file bankruptcy on your own, or "pro se," local bankruptcy attorneys have intimate knowledge of local rules that vary from district to district and can help protect your property. Most attorneys offer free consultations, so even if you do not intend to hire one, you can use this opportunity to learn how to exempt your assets.
- 5). Reaffirm your secured debts. If you are still making payments on a house or car, you can reaffirm your intention to pay these debts both during and after your bankruptcy if you intend to keep the assets. Usually, your creditor will agree to this reaffirmation once filed with the court and you can keep your assets without having to exempt them.
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