There is a broad rule that everything owned by the individual filing bankruptcy, as of the date of filing, belongs to the bankruptcy estate. This creates a dividing line. Property owned before the filing date and property acquired after the filing date. The post-bankruptcy property belongs to the individual filer-free of the claims of the pre-bankruptcy creditors. But the pre-bankruptcy property belongs to the Bankruptcy estate.
Does this mean you have to turn over all the property you owned prior to filing bankruptcy? No. An individual is allowed to remove from the property of the estate, and keep, any property that is exempt. Determining what property is exempt is therefore very important. As is determining the value of your pre-bankruptcy property. The individual filing bankruptcy would turn over to the Trustee any property which is not exempt, or pay the Trustee the monetary equivalent.
The Bankruptcy Code allows the use of two separate exemption schemes: (1) federal exemptions, and (2) state exemptions. If the individual does not have a lot of equity in their home, often they are better off choosing the federal exemptions over the state exemptions.
Valuing property for exemption purposes is complex. The Bankruptcy Code requires that property be valued at “fair market value”. Fair market value is the price a buyer is willing to pay for the property in its current condition-not the value of the property when new.
Valuing property and applying exemptions can be a complex process. Let us help you navigate your bankruptcy. Contact the attorneys at Kain and Scott and see us at www.kainscott.com. You will be glad you did!