Equity Plays A Major Role in Determining Bankruptcy Liquidation Of Assets

Written by Adam Peck Category: Nursing Homes January 23rd, 2013 2 min read

Many people are under the impression that once you file for chapter 7, you are essentially giving up all of your property. This is not the case. While the purpose of filing a chapter 7 bankruptcy is to liquidate assets in an effort to repay debts, equity plays a big role in the decisions the trustee will make.

As an example, if you owe $18,000 on your 2009 Ford Focus, but the fair market value is only $12,000, your equity in the car is negative $6,000. However, if you owe $11,000 on your 2009 Ford Focus and the car is worth $15,000, you’ve accumulated $4,000 in equity.

If you do not have positive equity in your property, then the trustee will likely not try to liquidate it to repay your debt to the creditor. The reason is there is no monetary gain for the creditors in selling the property because there is no equity. Essentially, there is no money to pull out of it. This is known as abandonment in a bankruptcy case.

If you do have significant equity in your car or other property, find out if it is less than the allowable exemption level in your state. If you have equity in your property that is greater than exemption levels, the Chapter 7 Trustee may attempt to sell your property for the benefit of your creditors.

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Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.