Giving up all of your assets is one of the most daunting aspects of filing for bankruptcy. Nobody wants to have to part with their hard-earned money and possessions.
Fortunately, this is rarely the case when you file for bankruptcy. There are many ways to protect your assets, at least some of them when you file.
Can you file for bankruptcy with money in the bank and keep that money?
Maybe.
Here’s what you should know.
Bankruptcy Means Test
It’s important to understand how the bankruptcy means test works. The means test is used by courts to determine whether or not you qualify for Chapter 7 bankruptcy in most cases. It takes into account your income and expenses over the six months before filing for bankruptcy.
If your income is less than or equal to the median income in your state (as determined by the US Trustee Program), then you pass and qualify for Chapter 7 bankruptcy in most cases. However, if your income is above the median, then you will likely qualify for Chapter 13 instead (which requires repayment of some debt).
Bankruptcy Isn’t Free
Bankruptcy requires that anyone filing pay court fees and other costs.
The first cost associated with filing for bankruptcy is the fee charged by the court. This fee varies depending on your jurisdiction and the type of bankruptcy (Chapter 7 or Chapter 13) that you are filing.
Additionally, you’ll have the cost of a bankruptcy attorney. This is optional, but filing for bankruptcy without an attorney can end up costing you more in the future. Don’t assume you’ll save money by handling your bankruptcy case on your own.
Also, keep in mind there are additional costs such as credit counseling or debt repayment plans. Your attorney can help you find qualifying programs that are affordable. Some attorneys even provide support for getting back on your feet after bankruptcy.
How Do You Afford to File?
Filing for bankruptcy can be affordable even if you don’t have much money saved up. Most courts offer payment plans that allow filers to pay their filing fees over time.
Additionally, some attorneys allow clients to make payments on their legal fees rather than paying the full amount upfront. Make sure you understand all the terms before signing on with one of these plans.
Finally, some organizations and charities offer low-cost legal representation or assistance with filing paperwork.
Protecting Your Assets with Exemptions
But what happens if you can afford the cost of filing for bankruptcy and your concern is protecting what you have, despite your financial struggles?
Not everyone filing for bankruptcy is penniless.
For many people, the answer to guarding their assets against the bankruptcy court is exemptions.
When filing for bankruptcy, certain assets are exempt from liquidation. This means the court cannot take them.
Exemptions vary from state to state. They generally include things such as:
- Clothing
- Household goods/furniture
- Tools of trade/professional equipment
- Retirement accounts/pensions/annuities
- Certain amount of equity in real estate
- Some vehicles owned by the debtor
In addition to these tangible items, most states also allow debtors to exempt cash and other liquid assets such as checking or savings accounts up to a certain threshold. This is known as a “wildcard exemption.” It usually ranges between $400 and $1,000 depending on the state in which you file.
So can you file bankruptcy with money in the bank? Yes, but only if it falls within the limits set forth by your state’s wildcard exemption law.
If you’d like to discuss your situation and learn how you can best protect your assets when you file for bankruptcy, contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA) or; (912) 324-3176 (Jesup, GA) to schedule a consultation.
