If I File For Bankruptcy Do I Get To Keep My Property?
One of the first and most frequently asked questions I get as a Sonoma County Bankruptcy Attorney is, “If I file for bankruptcy do I get to keep my property?” Clients are understandably anxious about losing their car and not being able to get to work, or even more importantly, they want to make sure their home will be safe. Clients often have substantial retirement accounts that they absolutely cannot lose.
Short Answer: Yes
The short answer and the good news is, “Yes, you can keep your property if you file for bankruptcy.” In fact, in the most common type of bankruptcy filed by the majority of people, the debtor keeps all types of property; the only thing they lose is their debt.
California has very liberal exemption laws; i.e., protections for all types of property. There are specific protections for almost all categories of property including home equity, automobiles (including motorcycles, quads, RVs, etc.) furnishings, jewelry, collectibles, sports equipment, work equipment, etc. Additionally there is an exemption amount for property that may not be specifically exempted. For example, a person might have gold coins, cash or other valuable property that isn’t covered by a set category. That property can be protected by a general exemption called the wild card exemption; think of it as a bank of protection that can be used to cover anything you own.
Tax-deferred retirement accounts, such as 401(k)s and IRAs, are safe in bankruptcy because they are not included in the bankruptcy estate; Congress recognizes that retirement accounts are so critical to the future financial health of the debtor that they are protected without limit. Consequently, clients who have a 401(k), IRA, PERS, STRS, or equivalent account who file bankruptcy get rid of all their debt and still have tens or sometimes even hundreds of thousands of dollars in their retirement accounts after the case closes.
Can Someone Take Inventory of Personal Property?
Finally, a mistaken belief about the bankruptcy process causes some clients to wonder if someone comes to their house to physically inventory their belongings. Again, the answer is straightforward and simple, “No”. No one comes to your house to look at your stuff.
When filing bankruptcy you do have a legal duty to provide true and accurate information, and you will review your petition and sign it under penalty of perjury. That’s it. The bankruptcy process is not invasive.
California Exemption Laws Protect Your Property
The vast majority of people who file a bankruptcy in California file a Chapter 7 bankruptcy, and in a Chapter 7 you will not lose any property. California exemption laws provide liberal protections for all types of property. And if you have property with values that exceed those exemption limits in Chapter 7, that’s when Chapter 13 may be the best alternative. Chapter 13 bankruptcy is the subject of a future post.
If you have any questions about what property you can keep in bankruptcy, or any other aspect of the bankruptcy process, please call the Santa Rosa, California, Law Offices of Brian Barta at (707) 542-2844 or fill out our online form today! The consultation is absolutely free and I’ll be happy to answer your questions. We serve clients throughout Sonoma County, California.