How To Keep Non-Exempt Assets In Bankruptcy

August 2nd, 2010 by Reed Allmand

Whether you file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, there are certain assets that are exempt from seizure by the bankruptcy estate and creditors.  Exemptions are determined by federal and state bankruptcy law; an experienced bankruptcy attorney can help a debtor figure out how they can maximize their exemption rights.  However, there are some assets that may not be exempt in bankruptcy that the debtor wants to keep.   But how can a debtor keep assets that are not protected by bankruptcy exemptions?

In a Chapter 7 bankruptcy a debtor who wants to keep a non-exempt asset may offer to “buy out” the bankruptcy trustee.  What this means is that the debtor will pay the bankruptcy trustee the difference between the asset’s value and the actual bankruptcy exemption dollar amount.  For example, many debtors may want and need to keep their vehicle during bankruptcy especially if it is fully paid for.  If a debtor has a vehicle that is worth $10,000 and the exemption only covers $6,000 the debtor could pay the bankruptcy trustee $4,000 to keep the car.  Oftentimes a bankruptcy trustee will be willing to accept a little less especially since it costs the bankruptcy trustee to store and secure the vehicle. So a debtor may be able to offer the bankruptcy trustee $3,000 or even $2500 instead.  However, the bankruptcy trustee might decide to hold a mini auction of the vehicle even if you offer him/her cash payment for the vehicle.  Why?  Because it is the responsibility of the bankruptcy trustee to get the maximum value out of any assets that are in the bankruptcy estate.  However, if you are the highest bidder, you will be able to keep the vehicle.

Make sure that you discuss all of these issues with your bankruptcy attorney so that he/she can work with you to create a strategy that will secure the assets you want to keep.