IN a Chapter 7 Bankruptcy petition, the debtor is required to list down in the bankruptcy petition all his assets in the applicable schedules which are part of the bankruptcy petition. These assets are classified as real or personal property. The debtor is also required to list down all secured assets.
From all the assets listed in the petition, the debtor can request that all or some of his assets be classified as an “exempt” asset. The debtor must cite the applicable provision of the law on which the requested exemption is based. Exempt properties are those assets or properties that a debtor can keep despite of filing bankruptcy. Allowing the debtors to keep certain basic assets despite a bankruptcy filing is one way of helping debtor filers start anew after bankruptcy.
However, most Chapter 7 filings are considered “no asset” cases, which means that the debtor does not have non-exempt properties that trustee can sell or dispose of. Therefore, most debtors get to keep whatever they have or own prior to filing bankruptcy.
Some states allow debtors to choose either the federal bankruptcy system or the state exemption system. However, in California, the debtors can only choose the either of the two (2) California state exemption systems but not the federal bankruptcy exemption system. Debtors will need to choose which system is most advantageous to them. The first system is based on state law exemptions listed in the California Code of Civil Procedure section 704. The second system is a list of bankruptcy-only exemptions in California Code of Civil Procedure section 703.140.
For those assets that are secured, a debtor is required to state in his petition what his intentions are with regards to those secured debts in the “Individual Debtor’s Statement of Intention” form. Secured debts are those with assets pledged as collateral for the loan. The usual secured debts are car loan debts and real estate mortgage loans. If you are not current on your payments, you will probably lose the property. In this case, you might want to consider filing Chapter 13 instead, provided you are eligible to file one.
If you are current with your payments for a secured debt when you file a Chapter 7 bankruptcy petition, a debtor can either surrender or retain the property under certain conditions. If the property is surrendered, the debt is extinguished and the debtor is no longer liable for the debt.
On the other hand, if the debtor wants to retain the property, he can either redeem or reaffirm the debt, assuming that any equity is covered by an applicable exemption. When you redeem a property, you agree to pay the “replacement value” of the property. Replacement value refers to the amount a retail merchant would sell the property, considering the present age and condition of the property. The debtor and creditor often come to an agreement as to the replacement value. If they cannot agree, the court decides in a valuation hearing what the replacement value is. More often than not, the replacement value is less than the current balance of the debt.
Reaffirming a debt means the debtor agrees that he will still be liable for the debt even after bankruptcy. It means that the personal liability and the creditor’s lien on the collateral will remain until the debt is fully paid. A reaffirmation agreement is not taken lightly by the court. The same will have to be submitted to the court for approval and the debtor is required to attend a reaffirmation hearing for this purpose.
If you are contemplating of bankruptcy, it is advisable to seek the counsel of a bankruptcy lawyer to guide you on the intricacies of filing for such petition/s.
Atty. Gwendolyn Malaya-Santos is a member of the State Bar of California and the Integrated Bar of the Philippines. To schedule for a free initial consultation, please call Tel. Nos. (213) 284-5984 or (626) 329.8215. Atty. Santos’ office is located at 3450 Wilshire Blvd., Suite 1200-105, Los Angeles, CA 90010.
Information contained in this article does not, nor is it intended to, constitutes legal advice for any specific situation and does not create a lawyer-client relationship. It likewise does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
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Atty. Gwendolyn Malaya-Santos is a member of the State Bar of California and the Integrated Bar of the Philippines. To schedule for a free initial in-person consultation, please call Tel. Nos. (213) 284-5984 or (626) 329-8215. Atty. Santos’ office is located at 3450 Wilshire Blvd., Suite 1200-105, Los Angeles, CA 90010.
* * *
Information contained in this article does not, nor is it intended to, constitutes legal advice for any specific situation and does not create a lawyer-client relationship. It likewise does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
