When you file bankruptcy, which of your assets must you declare on your petition? The answer is simple- all of them. But what about the fact you want to keep your car? Relax; I just said you have to declare them, not that you have to lose them.
While you have to declare all of your assets, most bankruptcy debtors keep all of the assets they want to keep. Chapter 7 debtors get to keep property with equity up to an allowable amount of exemptions determined by either state or federal exemption laws, and the majority of debtors fall within the exemption levels. Chapter 13 debtors get to basically keep all property they want, provided that if the amount of equity exceeds the exemption level, the debtor pays the cash equivalent of the over exempt amount to its creditors in the plan.
It is important to remember that barring something unusual like fraud, debtors surrender property in bankruptcy in only two circumstances- either the debtor has too much equity in the property or the property is a secured debt and the debtor is not current, allowing the secured creditor to exercise its rights against the property.
Prior to filing, debtors must get together with their attorneys and determine all of the debtors property and whether it fits within the exemption levels. Debtors must know and understand at the initial consultation which property it might be forced to surrender or pay the cash equivalent to retain. This also helps the debtor evaluate whether a chapter 13 is a better option than chapter 7.
So what are the assets that the debtor must declare? Some are obvious- like cash, checking accounts, savings accounts, jewelry, clothes, cars, and real estate. Others are not so obvious- like possible personal injury claims, inheritances, stock ownership in the debtors own business, or the debtors upcoming tax refund. And finally there are those assets that are almost always fully exempt- for example, alimony, child support, IRA and a 401(k).
The debtor values each asset, with some being clearly calculable like the amount of money in the debtors checking account; whereas others are not so easy to figure out, like the amount the debtor expects to settle a personal injury suit. Certain categories have specific dollar amount exemptions. For instance, whether using state or federal exemptions, the debtor will get a certain dollar amount to exempt for vehicles. Other categories do not allow for any exemptions; therefore, the debtor must dip into the wildcard to exempt for that category. In Georgia, there is no exemptions for cash, so for the debtor to exempt cash, the debtor must use the wildcard.
After valuing all of the debtors assets against the debtors encumbrances as to those assets, the debtor can determine its equity position in each asset. Although other factors will also weigh in on the debtors decision to file a 7 or a 13, the debtors equity position in its assets is a major factor for the debtor to factor in when deciding which chapter, if any, the debtor should choose.
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