Protecting Assets in Bankruptcy

When you file Chapter 7 Bankruptcy, it is sometimes referred to as "Liquidation Bankruptcy".  "Liquidation" is when goods or assets are sold off to create cash that can then be distributed evenly among your creditors whose debt you are eliminating.  However, in most Chapter 7 Bankruptcies, the person filing the bankruptcy (the Debtor) never loses a single asset.

This is due to the use of "exemptions" or asset protections.  In Florida, you are usually allowed up $6,000.00 worth of general asset protection for assets that are owned outright.  $1,000.00 of this $6,000.00 needs to be used on a vehicle or it is lost.

That means that if you have a car that is owned outright and it is worth less than $5,000.00 (value is usually determined using the N.AD.A. guide), then you won't even risk losing your car. However, if your car is worth more than $5,000.00, then further analysis is required.

For example:

You have a 2010 Ford F-150 valued at $10,000.00.

You still owe the folks at Ford $11,000.00 for the loan on this vehicle.

Since there is no "equity" or value that exceeds what you owe, you have nothing that you are required to protect.

Now let's take that same vehicle but say you only owe $7,000.00 on the vehicle.

A value of $10,000.00 minus an outstanding debt of $7,000.00 leaves $3,000.00 in equity that must be protected if you are to keep that vehicle.  In this situation, you could use half of your exemptions and still have another $3,000.00 left over for the rest of your personal property.

The bottom line is that in most Chapter 7 Bankruptcy cases with the Law Offices of Keith D. Collier, our clients never lose a thing.  Its all about planning and timing and making sure you're getting the most out of the exemptions that the Bankruptcy Code allows you.  However, exemption law is not always clear and straight forward, especially if you recently moved to Florida.  For a discussion about using out-of-state exemptions, click here.

For a free in-office or phone consultation, please call the Law Offices of Keith D. Collier now.  We are here to help you.