What Assets Can You Retain When Filing for Bankruptcy?

Interviewer: In filing bankruptcy, are there any personal assets that can be retained, for instance your home, your cars, if you have a vacation home, land, livestock?

The Debtor Is Permitted Exemptions In Order to Retain Some Personal Property

Vance: The big question is the equity. What's this asset worth? Now the bankruptcy laws do give you exemptions to protect some of your equity. As far as an automobile, the titled owner gets an exemption of $3,600 or $3,650. If the asset is free and clear and worth less than $3,600, they'll get to keep it.

The Trustee Will Examine Assets with Equity That Can Be Sold to Pay off the Debt

If there is any equity exposed over and above what the exemption amount what the trustees look for. Can they take this asset and can they sell it?

If there are any liens on the asset, can they pay off the liens? If there are any exemptions, can they pay the exemptions? If they did all that, would there be any money left to give to the creditors? It's called the liquidation test. Once they go through that analysis and there's no equity, the trustees will not seize the property.

Interviewer: Would that pertain to say livestock as well?

Vance: Individuals whose farm is their livelihood, the livestock is collateral for loans, so it just depends. It depends on equity. If the Trustee can make any money on it for the benefit of the creditors, they'll give the debtor the option of paying the Trustee the equity or the Trustee will take the asset and sell it. The debtor will get the option of keeping it if he wants to, but he will have to pay a reasonable an amount for the asset.

What Can You Do to Successfully Recover from Filing Bankruptcy?

Interviewer: What steps would one need to go through to recover from bankruptcy?

Make Timely Payments to Re-Establish Your Credit

Vance: If you file bankruptcy and you have a house that you're paying on or a car that you're paying on, the key thing is to make sure that you keep making payments and the payments are timely. You will get offers for credit cards.

It's not a bad idea to get a credit card and make small charges with it, ensuring that you pay the balance every month. The same advice applies for anything you do own that you have liens on. If you are making installment payments, make sure the installment payments are paid on time and that they're never late.

If You Receive Credit Card Offers Post-Bankruptcy, Do the Cards Come with High Interest Rates because of the Bankruptcy?

Interviewer: Would one normally see higher interest rates attached to those credit card offers because of the bankruptcy?

Vance: Yes and I advise my clients that the interest rates will vary. If you wanted to buy a car after bankruptcy, the interest rates will vary from 8% all the way up to 25%, but you just need to shop around and find the best one for you.

Don't just settle on the firs offer if the interest rate is high. You're not going to get much lower than 8 or 6 to 8% when you buy a car after you file bankruptcy. Credit cards will also come with varying interest rates, so you just have to shop around, but there are good rates available for people that file bankruptcy.