Chapter 7 bankruptcy involves liquidating assets to pay back creditors in exchange for a complete forgiveness or discharge of most debts. Among other duties, bankruptcy trustees are charged with the responsibility of evaluating a debtor’s assets to see whether there is anything of significant value that can be sold to pass on to creditors. Absolutely everything you own must be disclosed, however, only non-exempt property is subject to sale. It is important to understand that a bankruptcy trustee will primarily be interested in property that has equity. What is equity? Equity is the value of property after any debt that encumbers it has been subtracted from the overall value. For example, a car that has a blue book value of $20,000 with an outstanding loan balance of $15,000 has roughly $5,000 of equity.

If John W files bankruptcy owning a car with no equity (meaning he owes more than the car is worth) the bankruptcy trustee has nothing to distribute to creditors and will not come after the property. Any money gained from a potential sale of the car would be owed to the car lender. If you are considering filing for bankruptcy and are concerned that some of your property may be subject to sale, evaluate your equity. Do you have any? If the answer is no, the property will be safe from liquidation and assuming you can continue to make payments post-bankruptcy, you can likely keep it through the process. If after subtracting the amount of a loan from the overall value of an asset you find that there is equity in the property, consult a knowledgable bankruptcy attorney. An attorney will be able to educate you on your state’s exemption laws and how they will affect your property. Many who file for bankruptcy are able to keep all of their property while gaining a fresh start financially.