Keeping your home or car even with bankruptcy

Declaring bankruptcy is often one of the last efforts of debtors who need to get out of their financial troubles. With the financial crisis causing all kinds of problems regarding finances, expenses, employment, income, and debts, more and more people are being forced to file for bankruptcy. One of the biggest questions that most debtors have when they are planning on filing for bankruptcy is whether or not they will still be able to hold on to their assets. If you are worried about whether or not you will be able to keep some of your important assets, such as your home, then you should continue reading.

When you file for personal bankruptcy, you basically have one of two choices. You can file for either chapter 7 liquidation bankruptcy, or chapter 13 debt adjustment bankruptcy. Each of these types of bankruptcy gives you a viable option for planning and making your fresh financial start. Depending on the type of bankruptcy that you file for, you may or may not be able to hold on to your assets. In either case, however, you will most likely have to liquidate some of your assets in order to pay off some of your creditors.

Understanding the differences between chapter 7 and 13 bankrupt filings

To get a better idea of whether or not you will be able to keep your assets, it's important to first get a good comprehension of both chapter 7 and chapter 13 bankruptcy. Let's start out by discussing chapter 7 bankruptcy. Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy," because many or all of your assets are liquidated in order to pay off your creditors. Depending on state bankruptcy laws, some of your assets may be exempted from liquidation, but all cases will result in your assets being turned over to a trustee who will be responsible for liquidating your assets. Once your assets are liquidated, much of the resulting cash is used to pay off your unsecured claims. In order for a creditor to make unsecured claims, they will have to submit proof to the bankruptcy court. If the proof is approved by the court, the creditor will receive a portion of the bankruptcy settlement. Creditors who have secured claims will receive a portion relative to the worth of the secured asset. The debts are then dismissed and the debtor will no longer be held personally liable for paying off the debts.

Under chapter 13 bankruptcy, the debt of the person filing for bankruptcy is adjusted to create a more lenient repayment plan that the debtor can handle. Chapter 13 bankruptcy is mainly designed for debtors who still have a steady amount of income and, therefore, still have the means to pay off their creditors. When filing for this type of bankruptcy, the debtor will be required to propose an adjusted repayment plan to the bankruptcy court. Coming up with a viable and reasonable repayment plan will usually require the help of a bankruptcy lawyer. This is because your repayment plan will be scrutinized by the bankruptcy court, which will decide on whether or not your proposal and your chapter 13 bankruptcy filing will be approved. The idea behind this type of bankruptcy is to give consumers the option to hold on to some of their important assets, such as their homes, while still giving them a way to pay off their creditors.

Qualification and eligibility

To qualify for chapter 13 bankruptcy, which will allow you to hold on to some of your assets, you will need to meet the requirements for eligibility. Perhaps the major determining factor of your eligibility will be the "means test." The means test compares your income to the average income threshold of your state. If your income is over the average income threshold, then you will not be eligible for chapter 7 debt liquidation, but you may qualify for chapter 13 debt adjustment bankruptcy. Some of the other factors that will affect your eligibility include the size of your family, the amount of your outstanding debt, and the types of outstanding debt you are liable for.

The dangers of bankruptcy fraud to your assets

One side of bankruptcy that many people are not familiar with is the idea of bankruptcy fraud. The most dangerous type of fraud is misrepresenting your income amounts, your personal information, your employment information, and your financial information. All of this can be charged as serious federal offenses, leading to jail time and penalty fees. Aside from this outright kind of fraud, however, there is also a kind of bankruptcy fraud that is referred to as "fraudulent transfers." Some people who are trying to preserve their assets try to transfer the ownership of their assets to a relative. The problem here is that any transfers that occur withing the 90 days before your bankruptcy filing may be considered by the court as a fraudulent transfer. In other words, if the court suspects that the transfer was made in an attempt to hold on to assets or get a better bankruptcy settlement, the court has the legal power to undo the transfer. These type of transfers are also referred to as "preferential transfers," because they are basically done in the preferential interest of the debtor.

Aside from having the legal power to undo transfers made with the 90-day period before the filing, bankruptcy courts and bankruptcy trustees will also analyze the debtor's case to find other suspected preferential transfers. If these transfers are questioned in court, the bankruptcy court may decide to bring the related assets under the bankruptcy estate. The bankruptcy court may order extensive investigations into suspected transfers, meaning that there is essentially no restriction to how far back the bankruptcy court may examine. This is why the best decision you can make when filing for bankruptcy is to avoid making any transfers whatsoever. If a transfer that you make is questioned, you may be held personally liable for fraudulent behavior, leading to legal problems on top of your financial problems. Instead of trying to hold onto your assets, you should be ready for the possibility that you may lose all of your assets and find comfort in the fact that a good, honest, and approved bankruptcy filing can put you in the best position to change your financial state and your life as a whole. If you're thinking of filing for bankruptcy, you can fill out the form in this page for a free consultation with expert bankruptcy lawyers.

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