The Bankruptcy Code and the California Rules of Civil Procedure provide for specific exemptions to protect some or all of a debtor’s (the person filing bankruptcy) assets. One of the things the attorney will discuss with you during your consultation is your assets to determine the effect of Bankruptcy on your assets (your stuff) and your debts.
You will need to determine the value of your assets prior to filing Bankruptcy so that you can accurately list the value of your stuff, and potentially protect the equity in those assets with the exemptions that may be available to you. Your attorney will discuss this process with you during your consultation and in the preparation of filing your Bankruptcy case.
A Chapter 7 Bankruptcy is also referred to as a liquidation Bankruptcy because the court appointed trustee could sell (liquidate) your assets to pay your debts. You will not necessarily lose all of your stuff in a Chapter 7 Bankruptcy. In many cases debtors will keep all of their assets, even in a Chapter 7 Bankruptcy. You will want to discuss with your attorney all of your assets and all of your debts so they can review with you the potential effects of filing Bankruptcy in your case.
A Chapter 13 Bankruptcy is often referred to as a reorganization Bankruptcy. In a Chapter 13 Bankruptcy you generally keep all of your assets. As part of “reorganizing” your debts you may decide to “surrender”, or give back to the creditor, some of your assets that you do not want to pay or that you cannot repay. Assets that have equity that could not be protected in a Chapter 7 Bankruptcy with exemptions you can potentially keep in a Chapter 13 Bankruptcy. These assets are often referred to as having “unprotected equity”. If you do keep the assets with “unprotected equity” the amount that is unprotected is generally repaid into your plan and distributed to your creditors. Your attorney will discuss with you how this works, what assets you can keep in a Chapter 13 Bankruptcy and the effect of keeping those assets in the Bankruptcy.
So in summary, you usually can keep all of your assets whether you file a Chapter 7 or a Chapter 13 Bankruptcy.
One of the things that the attorney will discuss with you is the effects of Bankruptcy in your case. Although you could qualify for a Chapter 7 Bankruptcy, it might not meet your goals, so perhaps a Chapter 13 will get rid of the majority of your debts, help you keep your stuff and get rid of your second mortgage like you hoped!
We will discuss with you your particular situation, your goals, and the effects of the different types of Bankruptcy in your case.
Contact us to discuss your case!