Will they take all my property when I file bankruptcy?

One of the most stubborn myths about filing bankruptcy is that debtors lose everything they have by doing so. In the real world, most debtors don’t lose a thing!

Massachusetts, New Hampshire, as well as all the other states and the federal government have enacted lists of property that an individual may keep after filing bankruptcy. The legal jargon for the lists is “exemptions,” and the property you keep is called “exempt property.” The ultimate goal of a bankruptcy case, (at least from the point of view of the debtor) is to have ALL the property declared exempt. Somewhat confusingly, this is called a “no asset” case, because from the point of the creditors, no assets are put up for auction, and therefore there is no money to be distributed among them.

In other words, no bankruptcy trustee will arrive at your door ready to seize your favorite chair for liquidation. That’s just not how it works. But on the other hand, if you have a large amount of cash in the bank or hidden in your mattress the bankruptcy trustee may want to distribute some of that to creditors. But even cash may be protected in bankruptcy if you work with a competent bankruptcy attorney to create a pre-bankruptcy plan designed to maximize your bankruptcy exemptions. Remember, bankruptcy is not just designed to insure that creditors get paid, it is designed to give debtors a second chance financial and taking away all of their assets would not allow them to get that second chance.


By Doug Beaton

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