Assets on the Edge
The law allows all debtors to keep a bare minimum of property. Not all property is treated with the same degree of deference and not all states have the same opinion about what that “bare minimum” should be, but North Carolina allows its debtors $35,000 of home equity, $3,500 of vehicle equity, $5,000 of household goods, and an unlimited value in retirement accounts – to name just a few. When a debtor in bankruptcy owns property that is not exempt, he has two options: give up the asset in a chapter 7 or give an amount of money to his creditors in a chapter 13 that is equivalent to the non-exempt portion of the asset. Sometimes a debtor is unsure how much an asset is really worth or is unsure how interested a chapter 7 trustee would be in selling it. What if your car is worth $4,000? (Remember, the exemption limit is $3,500). Will the trustee sell it, give you the first $3,500 from the sale (the amount of your vehicle exemption) and distribute the rest to your creditors? He may, but not usually; $500 is just too small an amount of money for most trustees to spend time pursuing. How about if your car is worth $4,500? $5,500? $6,000? At $6000, you can be sure the chapter 7 trustee will sell your car. At $4,500 or $5,500, it’s anybody’s guess. But that’s no reason to necessarily file a chapter 13. If you have access to some amount of money, you can simply reach a settlement agreement with the trustee if he decides to sell your asset. If your car is worth $4,500 and the chapter 7 trustee indicates that he is going to sell the car, offer him $500 to leave the car alone. He just might take it. The trustee wants cash, not your car. If you offer him half of what he would have received by selling the car, everybody wins. You keep your car and the trustee doesn’t have to go to the trouble of selling it.