Keep Your Assets, Ditch Your Debt

Bankruptcy:  Keep Your Assets, Ditch Your Debt

Yes, you can keep your home and car in bankruptcy if you want to continue to make the payments and don’t have too much equity.


Debt Exemptions for Secured Assets

There are two types of debt, secured and unsecured.  The secured debt means that your creditor will take something from you if you don’t pay them.  Secured debt usually involves a home or a car.  If you want to keep your home or car, you will have to continue making payments.  In the vast majority of the cases you can.  There are a few exceptions, like if you own jet skis or something that the trustee might think unnecessary or if you have too much equity in an asset.

For secured property, we have to value the equity.  The amount of equity will determine if the Arizona state exemptions apply.  An exemption is exempt from the creditor collection process.  This means that you cannot lose that property to a creditor, even in bankruptcy.  The amount of equity you have in the vehicle is the difference between what you owe and what the vehicle is worth.  As long as you don’t have too much equity, you will be covered by an exemption.

In Arizona, for example, a normal debtor can exempt up to $6000 in equity in a motor vehicle.  If you owe $5000 and your car is worth $10,000, you have about $5000 worth of equity in the vehicle.  This amount will be covered by the exemption.  You can keep the vehicle if you want to keep making the payments.


Forfeit a Secured Asset (Give it Back) and Owe Nothing

If you decide you do not want to keep any secured assets, you can always give them back.  You can simply forfeit the jet skis in the bankruptcy and not owe anything else.  There is no deficiency balance in bankruptcy.  For example, if you owe $10,000 on a car and it is only worth $5000, you can simply forfeit the vehicle in the bankruptcy process.  You can get that good of a deal even with a bankruptcy.


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Bankruptcy Exemptions for Personal Property

There are exemptions for personal property, too.  Exemptions are things you own that creditors cannot take away.  Each state has their own list of property that is exempt from collection by creditors.  This is the same list normally used by the bankruptcy court.  For example, everyone owns household furniture and appliances.  Household furniture and appliances include your couch, your blender, and your bed.  As a general rule, these things need to be declared on your bankruptcy petition.  They can usually be declared in summary nature.  You just list “household furniture and appliances” without listing out each individual good.  That being said, no trustee is going to come over to your house and count your forks.

To use the exemption for household furniture and appliances, simply list the household goods on your bankruptcy petition.  You will then need to cite the state law that allows the exemption.  In this case, the exemption is $6000 and the statute is Ariz. Rev. Stat. Ann. §§ 33–1123, 33–1125 and 33–1127.  Your bankruptcy lawyer will take care of all of this.  These are some of the particulars he will manage for you.


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