Quick Thought For Anyone Contemplating Bankruptcy

Merry Christmas to all.  I have been incredibly busy lately and haven’t had much time to blog, but I’ve been having a recurring issue the last several weeks that I thought I would share with people.  It concerns bankruptcy and ramifications thereof.  Generally, when someone approaches me to file a bankruptcy, we discuss their basic situation, their income, their debt, and all that good stuff.  We get to the point where I can determine if they qualify for a Chapter 7 (straight) bankruptcy income wise.  If they do I then proceed to the often overlooked question of  “What do you own?”.  Generally the answer is “not much”, and after looking into it and performing my due diligence, I determine that this is in fact the case and we move forward with a bankruptcy.  However,  lately I have had several clients who want to file bankruptcy but enter the process with the pre-conceived notion that you can keep your “stuff” when you file Chapter 7.  Although this is generally the case, it isn’t always so.  It is true that you get to keep certain items when you file bankruptcy.  For instance, you get to keep any equity in your home. You get to keep the money in most retirement plans.  You get to keep most of you household goods and furnishings.  You even get to keep a church pew if you have one (I know, who would have a church pew?  I don’t know, but Oklahoma law establishes that you get to keep one if you have one).  These are just examples of many things you get to keep (called exemptions).  You even get to keep a car.  HOWEVER, your car can only be worth $7,500.00 or less, unless it has a loan against it.  If you own a car free and clear, and it’s worth more than $7,500.00, you can’t file bankruptcy and expect to just keep that car without any consequences.  Let’s say for example that you own a $20,000 vehicle free and clear.  You’re only allowed to keep a car worth the $7,500 or less.  What would happen?  The government (via the U.S. Trustee’s office (the office that overseas bankruptcies) would sell your vehicle, give you $7,500.00, and distribute whatever else was remaining to your creditors.  You could then go use that money to go buy a car worth $7,500 or less.  If you really wanted to keep the car, occasionally the government might let you pay them the difference between the $20,000 and the $7,500 and keep the car.  If you are able to do that, however, you probably didn’t need bankruptcy to begin with.  The lesson here is that you don’t necessarily get to keep everything you own when you file for bankruptcy.  You only get to keep what the government has decided is necessary to live your life (exemptions).   Don’t make a $15,000 mistake.  Make sure that when you file bankruptcy, you tell your attorney EVERYTHING you own so that you aren’t broadsided at court and end up having to give a lot of things to the trustee that you hadn’t counted on getting rid of.  If you don’t want to lose that extra money that your vehicle is worth, it may be best to seek alternative solutions to your financial woes.  There are ways to mitigate these types of mistakes.  If you are someone who may be experiencing some financial difficulty, and you might also be considering buying a high priced item, please consult with an attorney before you do so.  It will save you a lot of heartbreak in the future.  Note:  Mr. DeArman is a bankruptcy attorney in the Moore/Norman area.


About Ryan P. DeArman, Esq.

Ryan P. DeArman, Esq. Attorney At Law 2512 N. Moore Ave. Moore, OK 73160 405.501.7640 / 405.578.4336 fax rdearman@cox.net / www.rpdearmanlaw.com
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