Will I lose property?
Most of our clients do not lose any property. Congress planned the bankruptcy law to provide your fresh start. That means you get to keep your home, car, furniture, appliances etc. unless there is something unusual about your case. See Iowa Exemptions.
Some planning is required with respect to accrued wages, tax refunds late in the year and non-exempt assets. Your attorney can help you with these.
Common Property Issues
Here are the most common issues we see when it comes to potential loss of property.
- Filing when you have a large tax refund pending. This applies at tax time when you file bankruptcy before receiving the refund. Normally you will keep $1,000 single filing or $2,000 joint filing plus all earned income credit. Your attorney can advise you on how to protect all of your tax refund.
- Boats, motors, trailers, campers, motorcycles, Jet Ski’s, ATV’s and similar items. Congress does not consider these items essential to getting a fresh start, so unlike your home, cars, furniture, retirement plans etc. there is no exemption for these “toys”. But, say you have a boat worth $2,000 and you owe $1,900 on it. The lender gets paid first if the boat is sold so it is unlikely the trustee would want your boat. The trustee would likely “abandon” it back to you. So even though it is not exempt, you would normally keep it. Many non-exempt assets are of so little value that the trustees may not bother with them. There is a cost involved in filing papers with the Court, having the item picked up, stored, auctioned etc. If the item is only worth a modest amount of money, the trustee would be wasting time and money by taking it from you, so they will abandon it back to you. If you have a question about one of these items your attorney should be able to tell you what to expect.
- Business Equipment is exempt up to $10,000. This is designed to keep your small business operating if you wish. So if you have $40,000 in business equipment and owe $30,000, you would normally keep it.
- Bank Balances. You can have up to $1,000 single or $2,000 joint filing in all of your bank accounts and cash combined on the day of filing. Your balance includes outstanding checks.
- Undisclosed Assets. You must schedule (list) and exempt all your property in order to keep it. If you leave property off the petition it cannot be claimed as exempt.
- Extra Cars & Trucks. Although you can exempt one car per person, since some of your cars may have no equity (the loan is higher than the resale value) and some of your cars may have high mileage and be worth little, most of our clients keep extra cars and trucks.
Buy Backs & Pre-bankruptcy Planning
When an item is at risk your attorney will know what costs the trustee is facing to take the item from you. A favorable buy back can normally be negotiated. In this case you would pay the estate some portion of the value of the non-exempt item in order to keep it. There is also other legal pre-bankruptcy planning that your attorney can do with you to reduce or eliminate the need to buy back.
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