What Assets Could You Lose In A Chapter 7 Bankruptcy Case?
One downside of using Chapter 7 bankruptcy is the potential to lose assets. You will not lose every item you own, but you could lose some things. When you file for Chapter 7, you trade the benefit of receiving a discharge of your debts with the disadvantage of losing assets. For this reason, lawyers call this the liquidation branch of bankruptcy. If you want to file for Chapter 7, it might be helpful to learn about the assets you might lose.
Your lawyer will verify the balances in all your bank accounts when you file for bankruptcy. If you have more than a specific amount in these accounts, you might be forced to turn the excess cash over to your bankruptcy estate's trustee. The amount you can have on hand varies by state. Each state has rules and exemptions related to cash you can keep, so you should ask your lawyer about the amount you can have. If you have less than the allowable amount, you will not lose the money.
Most people that file for Chapter 7 end up losing their next tax return. If you typically receive a tax refund after filing your income taxes, you must tell your lawyer the amount. Your lawyer will see the amount you normally receive by reviewing the last few tax returns you filed, so you cannot lie. The trustee handling your case has the right to intercept your next tax refund check, but this happens only once. The trustee will not continuously seize your tax refund checks. Instead, they will only take the next one you receive. Therefore, you should plan accordingly for this event if you are using Chapter 7.
House or Car
The other assets the trustee could take are your house or cars. States have rules relating to these assets, too. Most states allow people to exempt a specific amount from these assets. If you can exempt enough of the value, you get to keep the item.
You will know before you file whether you will lose your assets through your case. Your lawyer can tell you this before you file based on your financial position. If your lawyer does not mention these things, ask them to explain how this part of a Chapter 7 bankruptcy case works.
If you have other questions about Chapter 7 bankruptcy, reach out to a local law firm to learn more.