4 Assets You Can Keep if You File for Bankruptcy

There is no guarantee you can keep any assets when you file for bankruptcy. However, there are some assets that will be surrendered first, while others will be preserved until later in the proceeding. If funds from the initial assets seized and liquidated are enough to cover debts, the remaining assets may be able to remain in your possession. 

Collateralized Items

Items that have been placed as collateral on a debt in default will be surrendered. There is little you can do to prevent surrendering these items since lenders have a legal claim to them in your loan contract. The most common items initially surrendered are homes and cars. Mortgages and standard vehicle loans use these assets as immediate collateral on the loan. If you have secured a personal loan with any asset, you can expect that asset to additionally be seized. The only chance you have of preserving ownership in collateralized items is to show the debt is not valid, settle the debt through other means, or swap for another piece of collateral of equal or greater actual value. A trustee will have to determine if these are options for you.

Items not Placed as Collateral

Any item that was not specifically placed as collateral on a loan may survive a bankruptcy. However, a court will continue to sell your assets and pay off your debts until those debts are satisfied. As such, no asset is truly protected in a Chapter 7 bankruptcy. You may consider filing for a Chapter 13 reorganization. This allows you to change payment schedules in order to settle debts. This option is only available to borrowers who have a consistent income and will likely pay down the debt as a result. Borrowers without predictable income will likely need to opt for a Chapter 7.

Items Secured in Marriage

It is possible that some items secured after you are married will not be taken in a bankruptcy if you file before you are married. This is to protect the assets of one spouse from falling victim to the bankruptcy of another spouse. Similarly, if you owned items before marriage and are filing a joint bankruptcy after marriage, some of those items accumulated before marriage would be protected. This can become complicated, based on how the debts entering bankruptcy were written. Joint debts, like joint mortgages, are handled differently from individual debts in bankruptcy.

Items of Personal Importance

You can try to preserve items of personal importance and family heirlooms. The best way to secure these assets is to place them in trust prior to declaring bankruptcy. When you place items in trust, you can give up ownership of the items and leave them to your predecessors before your death. Since you do not own the items, they cannot be taken and liquidated in a bankruptcy suit. Items laced in trust or given to children in the years immediately preceding a bankruptcy may not be protected. This is to prevent borrowers from hiding away assets prior to filing for legal liquidation.

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