Continuing my recent theme of bad reasons to avoid filing bankruptcy (there are some good reasons for avoiding bankruptcy, but that is for another post), today I’m going to tackle the “I don’t want my stuff to be sold” myth.
I never give legal advice until I feel that I have a full understanding of the situation – so if a new client walked in to my office and asked me, “if I file for bankruptcy, will the trustee sell my stuff?“, having absolutely no idea what his or her situation was, I would tell them I need to know more about the state of their finances before giving them an answer…but that’s the boring, lawyerly, bankruptcy attorney response and you’re surely not interested in reading that, are you? So, I will tell you what I’d be thinking, and that is: “it’s highly unlikely that you’ll lose anything of value.”
Now, there are some caveats to this…the trustee can and will sell personal assets to pay back your creditors, and your Utah bankruptcy attorney can’t do anything to help that. But the practical fact is just that it rarely happens. Why? There are three reasons why you probably will not lose any personal belongings if you file bankruptcy. Here they are:
- There are exemptions written in to the bankruptcy code that protect most of your treasured personal property. Granted, bankruptcy laws in Utah are more stringent than in most states. This is probably due to our nation-leading volume of Chapter 7 bankruptcy, and Chapter 13 bankruptcy filings. Nevertheless, there are reasonable allowances that let you keep clothing, household furniture, kitchen ware, beds, etc.
- Every chapter 7 bankruptcy attorney in Utah knows that even when a debtor has personal property that exceeds the exemptions in the code, the trustee will probably still not sell it! This is because used personal property like couches, televisions, tables, chairs, even computers are worth very little money in the open market. Which means that the trustee will not get very much money for these things if he sells them. At the beginning of your 341 meeting, the trustee will announce that he intends to abandon any property of inconsequential value to the estate. What this means is that he will not bother to sell things that aren’t worth selling. Now, that may not sound impressive to you, but “inconsequential value” means something different to the average trustee than it does to me and you. If I told you your TV was worth $400, you would probably not say that’s “inconsequential”, but the trustee probably would. The fact of the matter is, it takes a lot of juice to make a sell worth the squeeze for a trustee. How much juice? I can’t say – I’m not a trustee. Each trustee is different, each case is different, and ultimately, it’s up to the trustee to decide whether something is worth selling or not. That being said, I think the general assumption floating around out there is that something has to bring in more than $1000 to be bothered with – and it takes some pretty valuable personal property to be worth that much on the second hand market.
- The final reason is simple: chapter 13 bankruptcy. In a Chapter 7 “straight” bankruptcy case, the trustee closes out your estate and distributes it to your creditors, you move on with your life and start over. But in a chapter 13 bankruptcy, you keep ALL of your possessions, and you enter a payment plan to pay back a portion of your debts, after which your debts are forgiven. So for those of you who have something valuable that you wish to keep, there is always the option of a chapter 13 bankruptcy.