Assets in a Bankruptcy
Assets play different roles in a bankruptcy case. Today, we are going to talk about assets as they pertain to a Chapter 7 Bankruptcy. The majority of individuals filing for a Chapter 7 bankruptcy, file what is called a “no-asset” case. This means that your property was not liquidated and used to pay creditors.
What is considered an Assets?
When you file for a bankruptcy, all your property becomes property of the bankruptcy estate. An appointed Chapter 7 Trustee is assigned to oversee your bankruptcy estate. Your right to keep your property through your bankruptcy case will depend on whether they’re exempt. Every state has a set of bankruptcy exemptions you can use to protect certain property in your Chapter 7 bankruptcy. Your case will be a “no asset” bankruptcy case if your can protect all of your property.
An assets is any property that is regarded to have value. So an assets can be your car, the money in your checking account, or personal household good. Most of these assets are easy to identify, but some things are considered assets that your might not have considered. The most common asset people forget to list on their bankruptcy schedules is the right to sue from a third party (i.e. recovering money owed to you by another person). This assets can be protected, which is why it is important to have your paperwork prepared by an experienced bankruptcy attorney.
Different states offer you a choice between state exemptions and the federal bankruptcy exemption system. California is different. In the Golden State, you must use state exemptions to protect your property. The nice thing about having to use the California exemptions is that you can choose between two different sets of exemptions. The exemptions are listed under Chapter 4 of the California Code of Civil Procedure. The two sets of exemptions are commonly referred to as the 704 and 703 exemptions. Unless otherwise noted, all law references are to the California Code of Civil Procedure. These exemptions were last updated by the California Judicial Council to adjust for inflation on April 1, 2016. The next update will be April 1, 2019.
Usually when a Debtor has a lot of equity in their home, it is recommended that they use the 704 exemptions versus using the 703 exemptions. You want to be sure to compare the two sets of exemptions and file under the set that best fits your situation. Asset protection should not be taken lightly. An aggressive Chapter 7 Trustee has the administrative privilege to sell exposed, or unprotected, assets and pay your creditors. This can result in your case remaining open for one year, or longer. You want to speak to an experienced bankruptcy attorney about the different exemptions and how they apply to your case.