If I file for chapter 7 bankruptcy, what happens to my personal property?

Many people are under the impression that filing for chapter 7 "liquidation" bankruptcy means they will lose all their personal property. The reality is, in the great majority of chapter 7 personal bankruptcy cases, debtors will keep most, if not all of thier property.

The vast majority of personal property is either exempt, or will be "abandoned" by the bankruptcy trustee.

Exempt Property

Exempt property describes that property which is protected from sale by the trustees, or sale by creditors for the purposes of repaying debts owed. Exempt property varies by state, but your bankruptcy lawyer will be able to tell you how to keep as much property as possible.

Abandon

The great majority of your personal property will be "abandoned" by the bankruptcy trustee. This essentially means the trustee feels it is of too little value, or will be too difficult to sell.

Your Car

One piece of property that may not be exempt is your car. If you owe more on the car than what it is worth, then it will likely be abandoned by the trustee. If not, most attorneys are familiar with the local bankruptcy courts practices regarding automobile and auto loan debt, and can work out a way to allow their client to keep their car. Usually this is done by reaffirming the debt on the loan, or "redeeming" the debt by paying a lump sum instead of giving up the car.