When filers make the chapter 7 bankruptcy move, their financial situation undergoes some major changes. Part of chapter 7 bankruptcy is seeking assets to pay the creditors, and this is one area that few filers consider. Read on to learn more about the relationship between your assets and bankruptcy.

Assets Can Affect Your Bankruptcy

It stands to reason that many bankruptcy filers are not wealthy enough to own a lot of assets. However, bankruptcy courts monitor the property situation of all filers to locate assets. If an asset is identified, it could be seized and sold. The funds are used for various matters like administrative costs, the trustee's salary (they earn a commission), and sometimes payment to a creditor.

Even filers that have property have protections in place. Bankruptcy can take some property but only that which is not protected under an exemption. Exemptions allow filers to keep property. The homestead exemption, for instance, helps protect the primary residence from seizure. States vary in what is protected by exemptions.

 Valuing Your Assets

To learn more about your vulnerability to losing property with a chapter 7 filing, consider your own assets. Chances are many are not fully paid off. Most people have a mortgage and still owe money on their vehicles. Assets that are not paid for are only as valuable as the equity, which is the value of the asset minus the balance owed. Most bankruptcy trustees won't seize property that has a balance owed unless the item's value exceeds the balance.

As you review the exemptions in your state, be sure to deduct the loan balance from the value.

For example, if your pickup truck is worth $30,000 but you still owe $20,000 on the auto loan, the adjusted value of the truck might be only $10,000. In some cases, you could use exemptions to allow you to keep the truck.

Talk to your bankruptcy lawyer about assets that have loans. If you want to keep an asset, ask about using reaffirmation. That allows filers to keep certain items if they pledge to continue paying the balance as previously agreed to when the loan was signed.

No Asset Bankruptcy

The term no asset or zero asset does not refer to a filer that has no property. Instead, it means a filer has figured out ways to keep their property and still gain the debt relief of bankruptcy. To learn more, contact a chapter 7 bankruptcy lawyer.