What Property Can You Keep In Chapter 7?
In determining what property a debtor can keep in Chapter 7, the property is first divided into "Secured" and "Unsecured" property. However, the short answer is that most debtors are able to keep most of their assets either through the established exemptions as discussed below, or through negotiation with the trustee.
Generally, a debtor in Chapter 7 gets to keep all "Secured" property where the loan is current and the debtor agrees to keep paying the loan. When the loan on "Secured" property is past due, and the debtor is unable to either pay the past due amount or reach an agreement with the lender, this property is generally returned to the lender and the loan is wiped out.
"Unsecured" property is treated differently. In Chapter 7, the trustee is looking for assets that the trustee can sell in order to generate cash to pay the unsecured creditors such as credit card companies. The trustee is able to sell all assets that are included in the bankruptcy estate and which are not covered by an exemption. An exemption is effectively a dollar amount of an asset that is protected from the trustee taking it to sell. There are many exemptions available for debtors in California and most debtors are able to keep most of their assets. For example of one exemption, under California Code Section 703, the debtor's equity in one automobile is protected up to $3,750. This means that if the debtor's car has less than $3,750 of equity, the trustee can't take it to sell. If the debtor has more than $3,750 in equity in the car, there is a "Wild Card" exemption that may be available to the debtor to protect the asset from the trustee. For most of the debtor's household goods such as furniture, appliances, etc, all of these items are generally covered by exemptions. The "Wildcard" exemption can be used for any assets of the debtor.