The following is for informational purposes only and is designed to give examples of the actual experiences of the writer in preparing over 500 Bankruptcy Petitions and is not to be construed as Practicing or Interpreting the Law or the giving of Legal Advice.

In order to explain this properly, there is something that you need to know.  The Bankruptcy process is covered under Federal Law, meaning that most Bankruptcy rules and guidelines are the same all over the Country.  But the rules that govern whether or not you get to keep your Real Estate or personal property or normally governed by rules set by the State you live in,  There is  a set of Federal rules which any State can adopt if they don’t want to write their own.   These rules are generally referred to as “exemption law” and they lay out how much value you are allowed to have with regard to your vehicles, furniture, clothing,  jewelry. collectible items, tools that you need to work and so on. 

With personal items, they are generally valued at “garage sale value” or “craigslist value” .  The reason for this is that the Trustee who is assigned to oversee your case is allowed to take those portions of your personal property where that value exceeds the maximum dollar value as allowed by the “exemption amount” specified for that item based on the State you live in. 

Logically, the Trustee can’t get any more for your item(s)  than you could fairly get at a garage sale or on Craigslist.  So for instance,  Let’s say that the you live in Colorado and you happen to have very valuable furniture, that even on Craigslist would sell for $10,000 . If you are an individual person filing for Chapter 7 Bankruptcy, the “exemption” statute in Colorado currently allows you a total exemption amount for your furniture and household items of $3,000 .  (this would double to $6,000 for a married couple)  So if you list your furniture on the Bankruptcy Petition at $10,000, more than likely, the Trustee assigned to your case would question you regarding this value and if it was established that your furniture is really worth $10,000 the Trustee could require you to deposit with him/her the amount that exceeds the allowed exemption, which is this case would be ($10,000 actual value minus $3,000 allowed exemption value) or  $7,000 .  

These days the majority of Bankruptcy filers don’t have a whole lot left in terms of personal property, but you should be extremely careful in researching what you have and what it is worth.

For example, in Colorado, most retirement funds are exempt from the Trustee taking them, but this is not true in every State.    Generally speaking, cash left in your checking and savings account is not exempt ( most Trustee’s allow for the money going in and out of your account and look at the average balance after bills are paid).  Sometimes high average balances can be considered none exempt and can be taken by the Trustee.

Collectible items could be an issue.  For instance, let’s say you have a record collection that on ebay might fairly bring $5,000.  So you list this on the Bankruptcy Petition under “personal property.  Well for an individual, you generally would have a $1,500,00 allowable exemption currently in Colorado.    This means that the Trustee could have you turn over the $3,500.00 that exceeds the “exemption”

If you look at your personal property and decide to start selling off your “stuff”, this could also be a problem since the Bankruptcy petition specifically asks about transfers of property during a time period prior to the filing date of the Bankruptcy Petition.

You can find more information online by going to www.cob.uscourts.gov and additional information is available at www.bkfiler.com, which is for informational purposes only.