Why Do Most People who File for Chapter 7 Keep All of their Property?

It’s difficult to say with any accuracy how one case will end up compared to another, but it is true that most people will wind up keeping all of their property. There are really three fundamental reasons for this.

1. The property will be covered by your state or federal exemptions
2. The property will be “abandoned” by the trustee
3. The property will be reaffirmed or redeemed

Exemptions

Exemptions cover that vast majority of a petitioners property, so long as they don’t have any extraordinary assets. The two biggest assets that a debtor will have is a house and a car.  Most state homestead exemptions are more than enough to cover the equity available to a debtor, and auto and truck exemptions are usually enough to cover a moderate car.

Abandonment

The majority of other personal property will be “abandoned” by the bankruptcy trustee, so while it does become part of the bankruptcy estate, it’s either of too little value or too problematic for the trustee to sell.

Redemption and Reaffirmation

That property that is not covered by exemptions and worth too much to abandon is eligible to be liquidated by the bankruptcy trustee, however, as a last option, a petitioner may elect to reaffirm property secured by a debt, or redeem property owned outright.

If you’re considering bankruptcy, talk to a bankruptcy lawyer to find out all the legal strategies available to you to keep all the property you care about while getting rid of credit card debt and other debts that have got you into financial trouble.