You may be concerned that you will lose all of your assets if you file a Chapter 7 bankruptcy. After all, that chapter is often referred to as “liquidation bankruptcy.” Although you may be required to give up some of your property to the bankruptcy trustee who will then sell it to help pay your creditors, much or all of your property may be exempt. This means you get to keep it. How much of your property you get to keep depends on its value and how much equity you have in it. It is the amount of your equity that is exempt.
Although there are exemptions under both federal and state bankruptcy law, Kansas and Missouri allow the use of only their particular list of exemptions, not the federal list. A bankruptcy attorney will assist you in applying the specific exemption rules of your state. As a general rule, you will get to keep:
- A certain amount of equity in your home.
- A certain amount of equity in your car and personal items.
- Ordinary household goods and clothing. If they are of exceptional monetary value, there is a chance you will lose them to the trustee. This is a very unusual occurrence.
How the Trustee Evaluates the Value of Your Property
Whether or not you get to keep your property depends upon its value to the trustee and the amount of the exemption allowed. For example, in Missouri, you can keep up to $3,000 equity in your car. No matter how much your car is worth on the market, if your equity in it is $3,000 or less, the trustee cannot take it. For example, if the car is valued at $8,000, but you owe the lender $5,000, your equity is $3,000, the amount of the exemption, and you will keep your car. The same principle applies to your home and all other items.