Will I lose My House or Car in a Bankruptcy?
When you file for a bankruptcy, the ownership of almost everything you own passes from you to a bankruptcy estate that is managed by a court appointed trustee. Yes, everything includes your clothes, your TV, and even your toothbrush. So does filing for bankruptcy look like the scene from The Grinch Who Stole Christmas where the Grinch dresses up like Santa and takes everything— even the cat? The short answer? No.
The reason you don’t lose what you own is because each state and the federal government have passed laws that exempt certain property from the bankruptcy estate.
Exemptions
In a bankruptcy proceeding, if something qualifies under an applicable exemption, then you get to keep that thing. The federal government has created a model list of exemptions and each state has decided whether it wants to adopt the federal rules or create its own exemption rules.
Utah has decided not to follow the federal rules and has chosen to create its own rules regarding what you are allowed to exempt. However, all states have exemptions that let you keep property so you can get a fresh start. Utah, for example, allows you to protect $42,300.00 in equity in your home (as of 2020). If there multiple owners on the property you can protect up to $84,600.00 of equity in your home (as of 2020). Even if you have more equity than you can protect, there are options in bankruptcy where you get to keep all your assets, your home and car included. I discuss this below.
Which Exemptions apply?
The determination of which law governs your exemptions starts with a fairly simple question: where have you lived for the past 2 years? If you have lived in one state, that state’s law determines the exemption law that applies to you. If the answer to the 2-year question is not a single state, there are some complicated timing rules that kick in and it is best to discuss these with a knowledgeable attorney.
Does a Trustee or someone come to my home to take a look at my stuff?
The idea of everything passing into a legal entity controled by another person (the trustee) sound daunting and maybe even dangerous. However, if you are open and honest in your paperwork and you have an attorney with a good reputation, trustee’s rarely make house calls. You simply fill out your paperwork and disclose those assets to the court and your creditors. Again, if your are honest in those filings you’ll have nothing to worry about.
What about Non-exempt property?
As home prices soar again many people have equity in their homes. This means that sometimes you have more equity than you can protect. If you think this is the case you need to speak to a knowledgeable attorney (like the ones at Rogers & Russell). There are still options to keep the unprotected asset through a bankruptcy.
Long story short, the attorneys here at Rogers & Russell can help you protect what is yours and help you eliminate debt that is weighing you down. Call us today to set up a free consultation.