Most people can file Chapter 7 and not lose anything because everything they own is “exempt.” But what if something of yours isn’t?
In our last blog post a couple days ago we explained why most of the time if you file a Chapter 7 “straight bankruptcy” you would be able to keep all of your assets. We talked about the purpose of property exemptions, a bit about their history, and how they generally work.
But what if you have something that does not fit any of the property exemptions? Or far exceeds the allowed dollar amount in value?
Today we’ll cover two ways that such assets can be protected, and then the remaining two ways in our following posts.
1) Pay the Chapter 7 Trustee to Keep What You Want
Most trustees are happy to let you keep something that is not exempt if you pay him or her as much as the item would net the trustee if it were sold. Notice the word “net.” Accordingly, the trustee may even let you pay less than he or she would have sold the item for if there would have been some costs of sale—advertising, a broker’s commission, storage costs—made unnecessary by you paying instead.
Many trustees are even willing to accept monthly payments. After all, if you fail to pay the trustee can ask the bankruptcy judge to not give you or to revoke the discharge (legal write-off) of your debts, which the judge will readily do. Also, even with the most flexible trustees you will be given a limited time to pay—there is pressure on the trustee to finish up the case by gathering the money and distributing it to the creditors.
2) The Trustee Often Doesn’t Want Very Modest Assets or Ones Not Worth the Trouble
Chapter 7 trustees don’t tend to chase every available non-exempt penny. This is particularly true if the total to be collected is not enough to make distribution to the creditors worth the administrative time and expense that it involves. Trustees often announce at the end of the “meeting of creditors” that he or she is waiving collection of some modest asset because collecting it “would not provide a meaningful distribution to the creditors.” The hassle is not worth the benefit.
To be clear, once the trustee makes a determination that he or she is collecting some asset(s) so that there will be a liquidation and distribution to creditors—an “asset case”—then it is his or her legal obligation to grab whatever the law allows to be grabbed. Instead what we’re talking about here are modest assets that the trustee decides are not worth taking in order to have an “asset case” in the first place.
Talk with your attorney about what the minimum threshold for creating an “asset case” tends to be among the panel of trustees in your local bankruptcy court.
Trustees are also very sensitive about claiming an asset that creates risks for them or will cost money to liquidate. An example of the former is real estate with hazardous waste found on it. An example of the latter is debtor’s weak claim for damages that the trustee would have to pay an attorney to pursue and may still result in no money. The trustee may well abandon these kinds of assets as “burdensome.”
**Please see our next two blog posts about two other ways to protect your assets if they are not protected by a property exemption.**