Bankruptcy: will “they” make me sell my stuff?
By Cathy Moran, California Bankruptcy Lawyer on Mar 3, 2009 in Chapter 7 Bankruptcy, Featured, General Bankruptcy Information
To keep houses and cars through a bankruptcy, a debtor has to satisfy two different parties to keep an asset subject to a lien. The bankruptcy trustee is looking out for the unsecured creditors; the lender is looking out for itself. How does this play out in the case?
The bankruptcy trustee is on the lookout for equity in an asset that is not exempt. So, if the value of the car, say, is less than the amount owed on the car plus any exemption that protects the debtor’s interest in the car, the trustee is not interested. There is no value in that asset that can be realized for the benefit of unsecured creditors. One hurdle down.
However, to keep the asset after the bankruptcy, the debtor has to keep the secured creditor happy (i.e. current). The lender wants monthly payments, not the asset. The lien on the car provides the threat of repossession to keep the payments flowing. Generally, make the payments and keep the car. “They” are content.
This calculation points up the importance of getting the value of your “stuff” correct. Overstate the value and you suggest that the trustee could sell your asset for your creditors.
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