Protecting Your Possessions In Chapter 7

Many clients are terrified by the prospect of filing bankruptcy because they think their creditors will end up taking their worldly possessions. In reality, in over 90 percent of Chapter 7 cases, clients are able to keep all of their things, and still discharge their unsecured debts.

Why? It’s pretty simple. The fact is that the creditors do not want your personal property. What they do want, is money. Most personal property has very little liquidation value, and the cost of holding a sale to turn the property into cash also needs to be factored in. Valuing property accurately is often a key to having a successful case (problems arise if items are given too much OR too little value). I often ask clients to imagine holding a garage sale, and to estimate the amount of cash which their possessions would bring at one. This figure is usually much different than the retail value.

Clients can also utilize their North Carolina exemptions to protect their property. With $5,000 ($10,000 for married couples filing jointly) worth of household items, $3,500 ($7,000 married) equity in a car, and a $5,000 ($10,000 married) “wild card” exemptions available to protect assets, few clients have trouble keeping their possessions in a bankruptcy case.

The essential bankruptcy bargain is important to remember. For full disclosure, the federal government will grant you huge and powerful relief: the bankruptcy discharge.