What property will have to I turn over to the trustee

 

What Property Will I Have to Turn Over if I File For Chapter 7 Bankruptcy Relief?

When people consider Chapter 7 bankruptcy relief as a potential solution to their debt problems, one of the most common concerns is: “what property will I have to turn over?”

This is a valid concern. In the context of a Chapter 7, one of the primary things the Trustee is seeking to do is identify the property he or she may take and liquidate it in order to pay down your debts.

Consider this the sacrifice one must make for a “fresh start”. A “debtor”, the person who files for bankruptcy, will be given a “discharge”, a release from their personal liabilities on “dischargeable” debts, in exchange for turning over non-exempt property… and of course, following the rest of the bankruptcy rules.

So what property may you expect to lose? An initial assessment of this question generally involves a four step process:

1)     First, identify the property of the bankruptcy estate;

2)     Next, determine the value of the property and any encumbrances;

3)     Thirdly, claim appropriate exemptions in the property; and

4)     Lastly, calculate to what extent any given item may have non-exempt equity.

When a bankruptcy case is filed, an estate is created which is made up of all legal and equitable property interests of the debtor as of the date of the bankruptcy filing. The estate can also include property acquired post-petition, or after the case is filed.  And then there may be some interests of the debtor that fall outside of the estate.

Once you’ve identified all property of the estate, you must determine the value of these items and the balances of any encumbrances. This, like the first step, will likely be very tedious and overwhelming, but it’s something that must be done in order to receive your fresh start. Your next question may be: How does one determine value? You must list the “replacement value” of the property which means the price a retail merchant would charge for the property of that kind considering the age and condition of the property at the time of the valuation. In the Eastern District of Missouri, that typically means, listing the dollar amount the items may sell for at a second-hand store today.

The last steps involve claiming exemptions in the various property items and calculating the non-exempt equity. Exemptions are laws that allow a person to protect property from being taken for the payment of debts. There are state, federal and bankruptcy exemption laws. Which set of laws may be selected by the debtor in their bankruptcy case requires legal analysis and depends on a debtor’s residential history. But, for example, if Missouri exemption law is applicable in a bankruptcy case filed by an individual, Missouri allows a debtor to protect, or “exempt” $3,000 of equity in a personal vehicle, amongst other exemptions. If a debtor owns a car worth $10,000 and has a lien on the car for $7,000, the exemption of $3,000 would be sufficient to protect the equity (difference between the value and lien) in the car. To the extent property of the estate may have more equity than can be protected with exemptions, or, should the debtor own property that cannot be claimed exempt, the Trustee may likely demand that you turn over this property so that it may be sold to pay down your debts.

These steps represent the initial, general “blueprints” one uses to answer the question: what property may be taken for the benefit of unsecured creditors should you file for Chapter 7 relief. They are not comprehensive, but serve to offer some insight into one part of the bankruptcy preparation process.

If you would like to learn more, and you live in the St. Louis Metropolitan or surrounding areas, in the State of Missouri, please contact Stokley Martin Law Group, LLC for your free initial consultation. And please visit our St. Louis Bankruptcy website at www.stokleylaw.com.