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FACT OR MYTH: ‘Aren’t people who file for bankruptcy required to give up all their possessions?

Without fail, every time I’m introduced to someone for the first time and the discussion of what do I do for a living comes up, and I tell them that I’m a bankruptcy attorney, more often than not, the person will make the statement that ‘Aren’t people who file for bankruptcy required to give up all their possessions to the Bankruptcy Court’.

Over time, this notion would always be expressed to me and I was dumb founded as to why this notion, which is more of an urban myth, still remained in people’s fears about a bankruptcy. Just getting beyond the notion that you must surrender to the Trustee via a Bankruptcy Court all your worldly possessions as ridiculous and nonsensical, it got me to thinking that maybe this was holding some people back from pursuing a fresh start from their insolvency woes.

First and foremost, U.S. bankruptcy laws were created to provide people with a fresh start from the burdens of their overwhelming debt, this hopelessness of being perpetually insolvent. The quoted statement that follows captures the spirit of the necessity for a fresh start, “Allowing consumer debtors in financial distress to choose voluntarily an unconditional discharge has been a part of American bankruptcy law since the enactment of the Bankruptcy Act of 1898. The rationale of an unconditional discharge was explained by Congress more than 100 years ago ‘[W]hen an honest man is hopelessly down financially, nothing is gained for the public by keeping him down, but on the contrary, the public good will be promoted by having his assets distributed ratably as far as they will go among his creditors and letting him start anew”. [i]

This is where the skill and expertise of an experienced bankruptcy attorney matters the most. The bankruptcy laws allow you to exempt up to a certain sum amount of the fair market value of all your worldly possessions, which are called exemptions. The skillfulness of the bankruptcy attorney, lies in their ability to do a thorough equity analysis of your worldly possessions by ascertaining its fair market value and advising their client accordingly. The myth is that you must relinquish all your worldly possessions in order to receive your coveted fresh start from your insolvency woes, but the fact, which is the important part, is that you can still file for bankruptcy relief, and keep all your worldly possessions.

Filing a chapter 13 case serves that very purpose, whereby if you have certain assets that exceeds your allotted exemption amounts, the amounts that exceed your exemption can be dealt with through a well-prepared chapter 13 case. One very important point I need to make, and I mean very, very, very important point, and that is do not attempt to circumvent the bankruptcy law by fraudulently transferring title of your assets, or intentionally not disclose all your assets etc. Because you will be punished for that act, in that bankruptcy laws are designed with the intent of “Congress in enacting a general law by which the honest citizen may be relieved from the burden of hopeless insolvency”.[ii]

Not all bankruptcy attorneys have the same skill set or expertise, so it’s important that you store that in your memory bank when your seeking out an attorney. Nor are all bankruptcy attorneys comfortable in navigating a chapter 13 filing when dealing with an ‘excess equity case’ (That’s what we call a case where a person’s assets exceeds their exemption limits). I have that skill set and expertise to properly do an equity analysis of all your worldly possessions that you may own, or own jointly with another, and construct a case that protects your assets and helps you with obtaining your fresh start from the burdens of financial hopelessness.

So now that I’ve dispelled the urban myth about having to relinquish all your worldly possessions in a bankruptcy, and set the record straight in terms of what a bankruptcy was intended to do by Congress, just call me, or schedule your free initial bankruptcy consultation on my website: and lets get to work on ending your financial woes.


[i] See 11 U.S.C § § 727(b), 1141(c), 1228(a), 1328(a). See also Bankruptcy Abuse Prevention & Consumers Act of 2001, H.R. Rep.. No 107-3(1), 107tth., at 6 (Feb 26, 2001) (Emphasis added)

[ii] See Neal v. Clark, 95 U.S. 704, 709 (1877). (Emphasis added)

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