Chapter 7 Bankruptcy: Exploring What It Mean When The Trustee Abandons Your Property Or Asset

While filing for bankruptcy under chapter 7, you are required to surrender your assets to a bankruptcy trustee. The bankruptcy trustee is responsible for liquidating all of your assets and paying back creditors. However, thanks to the exemptions that have been made in each state, you do not have to surrender all of your assets, and can keep a certain amount of equity in your house and as personal property, such as money in the bank. From the assets that should be surrendered, the bankruptcy trustee has the option of abandoning the asset. 

The Reasoning Behind Why The Trustee May Abandon Property

Even if you cannot fully exempt a property and have to surrender it, the bankruptcy trustee still has the right to abandon it if he or she does not want to deal with the property. This generally happens if the asset is only slightly more valuable than the exemption amount. 

Why?

Simple, the fees and cost involved with selling the asset may be too high. Once your exemption amount is paid out to you, and once the fees and all of the costs are factored into the equation, there may not be any actual funds left over to pay back creditors. Even if there are funds available, it may be so minimal that it is deemed to be not worth the effort and time that would be put into liquidating the asset. If the trustee decides to abandon an asset or property, you will be legally entitled to keep it even after you are discharged from being bankrupt. 

Amount of Exemption That You Are Entitled To

To determine whether there is a chance that the bankruptcy trustee may abandon your property or asset, you will need to consider how much exemption is allowed in your state. For example, the homestead exemption in Nevada will allow you to keep up to $500,000 of equity in your house while the Oregon homestead exemption will only allow you to keep up to $40,000 of equity in your home. Married couples in Oregon are entitled to a larger exemption.

Conclusion

If the trustee abandons your property or asset, you will not be penalized for it. Instead, you can keep the asset or property, and your chapter 7 bankruptcy case will proceed as planned. The bankruptcy trustee has the right to pick and choose the assets and properties that they would like to abandon and would like to liquidate in order for you to pay off your creditors. To learn more about chapter 7 bankruptcy, visit Donald T Tesch, PS.