09 Dec Top 10 Countdown of Bankruptcy Myths: Will Debtors Lose All Possessions?
Folks are often afraid to file for bankruptcy as they worry that they will be left without possessions–that the trustee will take all their “stuff” or the kids’ “stuff”. The ones who really worry will even try to gift away property in order to keep it out of the bankruptcy trustee’s possession. They will start giving things away without talking to an attorney first.
STOP!! Each and every state has laws called “exemption laws” that allow debtors (folks in debt) to keep property (certain kinds) up to a certain amount as I explained in an earlier article on this site. Unfortunately each state is different. Even the federal bankruptcy law has a set of exemptions for debtors and those laws help the system work, according to Doug Jacobs, California attorney. Some states laws allow high value for possessions; other states have very low values for possessions. But in each instance, the trustee is not going to come marching into your home and strip it clean of all furniture, appliances, bicycles, knick-knacks, books, and clothing. Some debtors worry that the trustee will take their tax refund, as explained by Kevin Gipson of Louisiana. If a debtor seeks legal advice from an experienced attorney, those worries can be put to rest and some pre-planning can happen.
The worst case scenario, as explained by Pamela Stewart, a Texas bankruptcy attorney, is to transfer property to try to keep the property away from the trustee by giving it away or by hiding the asset (lying). Folks are often upset to find that these kind of transfers can have dire consequences, such as a denial of a bankruptcy discharge or even criminal charges by trying to hide assets. Hiding assets is just about the worse thing a debtor can do; don’t make your life even more stressful by being dishonest. Honest debtors find their bankruptcy a much smoother process.
Stay Tuned as the Countdown Continues! Myth #10 debunked: An honest debtor does not lose all his property!
photo: National Archives/Dorothea Lange for the FSA (c. 1930) Depression
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