Will I Lose All Of My Property If I File Bankruptcy?

March 18th, 2010 by Reed Allmand

One of the most insidious myths about bankruptcy is that debtors who file bankruptcy will lose all of their personal property.  For the umpteenth time, this myth is simply not true.  A matter of fact, most debtors who file Chapter 7 bankruptcy do not lose any of their property.  Every state, plus the federal bankruptcy code provides a generous amount of exemptions for debtors to use during bankruptcy.  Exemptions protect the debtor’s property from seizure during the bankruptcy process.  For example, in the state of Texas, the debtor’s homestead is exempt from seizure in bankruptcy, the debtor’s vehicle is exempt, plus a vehicle for every adult in the household is also exempt from seizure in bankruptcy.  Texas bankruptcy exemptions also cover retirement accounts and up to $30,000 in personal property such as furniture, jewelry, clothing, books and other household goods).  In other words, no bankruptcy trustee will arrive at your door ready to seize your music collection and appliances for liquidation.  That’s just not how it works.  But on the other hand, if you have a large amount of cash in the bank or hidden in your mattress the bankruptcy trustee may want to distribute some of that to creditors.  But even cash may be protected in bankruptcy if you work with a competent bankruptcy attorney to create a pre-bankruptcy plan designed to maximize your bankruptcy exemptions.  Remember, bankruptcy is not just designed to insure that creditors get paid, it is designed to give debtors a second chance financial and taking away all of their assets would not allow them to get that second chance.