Giving Up Real Estate in a Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, the trustee may sell a portion of the debtor’s property in attempts to repay creditors. Not everything has to be turned over to the bankruptcy trustee, however, as California bankruptcy laws allow the debtor to keep exempt property.
Property that is exempt is considered to be the “necessities of modern life,” generally including items that are necessary for living and working. Exempt items may include vehicles, necessary clothing, household furnishings and goods, personal effects, tools associated with one’s job, public benefits and up to a certain amount of home equity. Due to the extensive list of exemptions, most debtors are able to keep a significant portion of their property.
Only nonexempt properties are liquidated to allow the debtor to have the best opportunity to rebuild. Nonexempt property usually includes a second vehicle, family heirlooms, cash, bonds, stocks and collections of valuable items. It is understandable to be concerned about whether or not you will have to give up real estate that is not used as a primary home when filing for Chapter 7 bankruptcy protection. In most cases, a second or vacation home is considered to be a nonexempt property and will most likely be liquidated.
To be sure, it can cause a great deal of hardship for individuals who lose substantial assets and property through the bankruptcy process. However, the main goal is to pay back as much of the debts as possible, while still allowing debtors to reasonably get back on their feet.
The rules associated with Chapter 7 bankruptcy can be complex, so it’s important to work with a skilled legal representative as you go through the process. Consult a Los Angeles bankruptcy lawyer for the guidance and advice you need.