The answer to whether or not you are able to keep your furniture when you file for bankruptcy in California is “it depends.” Some of the factors that will influence what happens to your furniture include the chapter of bankruptcy filed, the exemptions you pick, and the value of your furniture. However, in most cases, a person will be able to keep all their furniture. In the following article, our Roseville, CA bankruptcy attorney from The Bankruptcy Group looks at these factors more closely.
Keeping Your Furniture in Chapter 7 or Chapter 13 in California
Most people who file for bankruptcy in California will file for Chapter 7 or Chapter 13. The underlying reasons for filing and a person’s income and assets will determine what chapter is required or most beneficial.
Chapter 7 is also known as liquidation bankruptcy. This is because a court-appointed trustee has the power to take possession of your personal and real property, sell it, and disburse the proceeds among your creditors. Your furniture could be included in this sale. However, California offers debtors ways to protect and keep their property through specified exemptions.
These exemptions are also available in Chapter 13. The significant difference in Chapter 13 is that a petitioner will propose a bankruptcy plan to pay all or a portion of their debt through a monthly payment to a court-appointed trustee. In this case, the trustee will not take possession of any property to sell, including your furniture. However, if your furniture could not be exempted, or protected, then the value that exceeds the exemption would have to be paid to any creditors through the bankruptcy plan.
California Bankruptcy Exemptions for Furniture
Many states allow a debtor to pick from their state exemptions or the federal bankruptcy exemptions. California is not one of those states. California bankruptcy filers are still given a choice, either the 703 or 704 exemptions. Depending on a petitioner’s circumstances, they will pick between two sets of California exemptions. Both sets allow individuals to exempt a significant amount of their personal property. However, not all exemptions are created equally. It is important to note that you must pick one set or the other. You are not permitted to mix and match exemptions from each group. Our Sacramento bankruptcy attorney will work closely with you, so the exemptions you use will be the most suitable in your case.
One of the main reasons people use California’s 703 exemptions is because of the included wildcard exemption. A wildcard exemption is just what the name implies, an exemption you could use on anything. The amount available is only $1,280. However, if you do not use any of your allotted $20,725 homestead exemption, it could be applied to your wildcard exemption.
This is important because, under the 703 exemptions, you are only permitted to exempt each piece of furniture up to $725. Therefore, if you have a very expensive piece of furniture, you might have to employ the wildcard exemption to either keep in Chapter 7 or avoid having to increase your Chapter 13 bankruptcy plan payment. Another important note is that your furniture’s value is neither the amount it originally cost or the replacement value. The fair market value is what you could be expected to receive if you sold the piece in a private sale.
Under California’s 704 exemptions, a petitioner is entitled to exempt the full value of their furniture that is necessary and used by members of the household. However, if these items have an extraordinary value, then they might not be exempt. Likewise, if the furniture is in storage or not being used, then it might not qualify for this exemption. When you speak with our knowledgeable Folsom bankruptcy attorney, they will discuss how your furniture should be valued and exempted.
Secured Furniture in a California Bankruptcy
Everything concerning your furniture that has been said above assumes that you own the furniture. However, it is not uncommon for furniture, especially when someone is furnishing a full room, to be purchased on credit. If you have a monthly bill for your furniture, then it is considered secured property in bankruptcy. Additionally, any debt you owe on the furniture is categorized as a secured debt.
Therefore, if you qualify for and file Chapter 7, the furniture is likely an asset that is not available to the trustee unless it has significant equity. Because the debt is secured, it will not be discharged in your case. Your monthly payment could count towards your allowable monthly expenses. However, if you fail to make your monthly payments, the creditor could be entitled to repossess your furniture.
If you filed for Chapter 13, the secured debt would be considered part of your allowable monthly expenses. This could lower your monthly bankruptcy payment. However, if the furniture is paid off during your bankruptcy, you might be required to raise your monthly trustee payment to reflect the additional income.
Another benefit of filing for Chapter 13 is that you can keep your furniture if you fell behind on your payments. Because it is a secured debt, you are permitted to pay your arrears through the bankruptcy plan.
Call Our California Bankruptcy Attorney for a Free Consultation
People have many fears and misconceptions regarding bankruptcy. Additionally, there are many things an average person will not know before they file. Bankruptcy is designed to give people a fresh start. That is difficult to do if a person loses their furniture when they file. Fortunately, California provides many protections to help petitioners keep their property, including their furniture. If you have any questions concerning exemptions, furniture, or bankruptcy in general, contact The Bankruptcy Group at 888-710-4334 to schedule a free consultation.