If you are considering filing for a chapter 7 bankruptcy it's helpful to understand what you might be risking. In most cases, chapter 7 filers don't lose property and the entire process goes smoothly and quickly. There is the potential that the bankruptcy trustee might make a home visit to inspect your property holdings, however. Read on to learn more about this inspection and how to be prepared.
When you declare chapter 7 bankruptcy you are essentially "declaring" that you are unable to pay your bills. The bankruptcy code, however, allows the seizure of property (such as homes, cars, boats, cash, and more) to be sold and the proceeds provided to your creditors. While this may seem like a scary situation, it actually only happens in isolated and extreme circumstances and there are safeguards in place to help protect the filer.
The home inspection
When you submit your bankruptcy paperwork you will include a list of your property. Many people own very little that would be of interest to the bankruptcy trustee, but homes and other valuable pieces of property might come under scrutiny. Not every filer gets a home inspection and the reasons for it are seemingly random. Your bankruptcy attorney should advise you before you even file whether or not your property might be subject to seizure.
The bankruptcy exemptions
One protection that might assist you in keeping your property is exemptions. An exemption is a dollar amount that can be deducted from the value of a given item. For example, the homestead exemption for two married people filing jointly might be $50,000 in your state. That means that you can deduct that amount from the equity in your home. There are also vehicle and personal property exemptions for other properties.
How the inspection happens
You will know well in advance about the inspection appointment, and it will be made by the bankruptcy trustee or a representative of the trustee. They will look over your property, take photos, and make notes. It is highly unlikely that they will go plundering through your drawers and cabinets, however. They are only looking for obvious and expensive items that were not listed on the property inventory or for items that require further investigation. Nothing will be taken from your home or other property on inspection day, but arrangements will be made later if you are to surrender anything.
The entire experience will be over in thirty minutes or less in most cases and will likely not result in a loss of property. Your chances of losing property depends on how valuable it is, the total amount of debt you are declaring, and the amount of any exemption. Speak with your attorney to learn more.