When your bankruptcy petition is filed many of the actual filings are documents called bankruptcy schedules. One of these particular schedules is called schedule B. Bankruptcy schedule B lists all personal property that the debtor has an interest in and typically includes all property owned except for real property. Examples of these types of property are cash, deposits of money, household goods, pension and profit sharing plans, claims, accounts receivables, business interests, automobiles, equipment, machinery, and inventory.
The debtor must list each item of personal property, including a description of the property, his/her interest, and the current value of the property. The bankruptcy filing should include the most accurate snapshot of the value of property as of the filing of the petition. For example, the debtor may have $1,000 in their savings account on the day of the consultation but has over $3,000 in the account when the petition is filed. The proper value of all bank accounts is therefore $3,000 on the date of filing and not the lesser amount.
The reason that this is important is that in a Chapter 7 bankruptcy the Trustee may be able to liquidate and sell your property depending on whether you can protect it or not with certain things called bankruptcy exemptions. You can usually “exempt” all of your property so that you shouldn’t have any issues in a Chapter 7 but valuing the property is important for this reason. You can protect or exempt up to $7500 in personal property ($15000 if filing jointly with your spouse) and this only includes equity in property (which means that if you owe money or a lien on a vehicle, then unless the vehicle is valued at more than the lien amount then you have no equity in the property).
A common personal property consideration in Chapter 7 happens during tax season. If you receive your tax refund before filing the case, you must be careful what you spend it on as you could be questioned about it at the 341 meeting. If you are due it after you file, the Trustee could seize your refund to pay off creditors. Also, the debtor should be aware that questionable spending can cause problems in bankruptcy. For example, if the debtor pays a relative $3,000 prior to filing this must be listed on the Statement of Financial Affairs and the relative will likely have to forfeit the money back to the Trustee.
It is also important to inform your attorney of any pending or potential lawsuits or claims against another party and the debtor is obligated to disclose post-petition claims if they arise. Call us today for a consultation with a Birmingham bankruptcy attorney if you have any further questions about filing for bankruptcy.