In retrospect, we’re all able to see that the recent economic downturn was sparked by a housing crisis full of unscrupulous sub-prime lending that easily spread to prime mortgages as unemployment rates rose. And, as many of you already know, the result of this collapse in the American housing market was a historic increase in the number of mortgage foreclosures, many in neighborhoods that had not previously had any issues with vacant or abandoned properties.
Today, vacant and abandoned properties sit in communities across the nation, driving down home prices and otherwise marring the market for those seeking to sell their inhabited spaces. And so, in this unfortunate financial climate, notions of abandoned property have become an unwanted signifier of our lingering economic malaise, A.K.A. “not a good thing.”
However, in bankruptcy, we can reclaim the idea of abandoned property, turning that former financial frown upside down with a few simple lessons in the concept of what this neglected property means in terms of a debtor’s personal bankruptcy estate.
Specifically, in your common Chapter 7 “liquidation” bankruptcy, any property or assets that is not otherwise exempt from the bankruptcy process is a part of the overall “bankruptcy estate” and sold with the proceeds of that sale distributed to your creditors. On the other hand, property is not put up for sale or liquidation when it is otherwise “abandoned” by the bankruptcy estate. If a property is therefore deemed abandoned in bankruptcy, and never becomes a part of your bankruptcy case, the property is likely to revert back to the party who has an interest in it, presumably the debtor, A.K.A., you.
So what would cause a property or asset to be deemed “abandoned” for the purposes your bankruptcy case?
The Property is Worth Less Than it Would Cost to Keep It In the Bankruptcy Estate
A bankruptcy estate (via the bankruptcy trustee) will reject a property when the property or asset in question is worth less than what it will cost to keep it as part of the bankruptcy estate. In some cases this means that the property, if sold to pay the creditors, would not recoup enough money in that sale to cover the expense of selling the property in the first place. If this is the case, the property may be booted from your bankruptcy.
A typical scenario involves an early-model or older vehicle that is only worth hundreds of dollars in value and would cost just as much in time, energy, and effort to put up. Assuming this vehicle is not able to be exempted under North Carolina's generous exemption laws (which allows every debtor to exempt $3500.00 in any vehicle and $5000.00 in miscellaneous property) the cost-benefit analysis would likely preclude its use for creditor claims at all and the car would be “abandoned” by the trustee for the purposes of the bankruptcy. Once abandoned, the debtor would then be able to reclaim the property.
Keep in mind, however, the issue of abandonment does not usually become an issue because most people don't own assets beyond the state's exemption limits. If for some reason, you do have assets beyond the exemption limits, one option is to file a Chapter 13 bankruptcy, paying out the excess equity over a 3 to 5 year payment plan. The reality is: you will not lose any property in bankruptcy unless you specifically decide to let go of the property.
As a result of the intricacies of bankruptcy law, including principles of property abandonment, it is essential to begin the bankruptcy process with assistance. An experienced bankruptcy attorney knows the ins and outs of the bankruptcy process and can assist throughout your case, no matter what your individual situation. Contact the Law Offices of John T. Orcutt in North Carolina TODAY for a totally FREE debt consultation. Just call toll free to 1-888-234-4181, or make your appointment online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.