What Property Do I Need to List in My Bankruptcy?

So your attorney has asked you to provide a list of all your property and the value.  What property should you include?  All of it.  This sounds overwhelming, but I can walk you through it.

Listing All Your Property.

Start with the big items.  Your house and your cars are easy.  Be clear about the make and model of your vehicle.  Then go from room to room.  Furniture, electronics, instruments, computers, cell phones, rugs, dishware, linen… open your drawers and closets.  For practical purposes, you typically do not need to list every dish or piece of silverware individually, and most items that are considered to be in “sets” can be listed as such.  For example, “towels and linens” is usually acceptable.  For televisions and other electronics, it is easier for your attorney if you include the year, make, and model.  After you’ve gone through your residence, walk around the exterior, and then look in the shed and garage if you have either.  Think of your hobbies – fishing, hunting, sports, quilting, etc.  List it all.  If you are honest and complete when listing your property, it adds to the credibility of the other representations you must make in federal court during the bankruptcy process.

Valuing Your Property.

Valuing your property is trickier.  Many lawyers tell their clients to provide a good faith estimation of what they could receive in a garage sale.  Also, if you know details about your property, you can ascertain fair market prices in seconds on Amazon.com or Ebay.com.  For automobiles, use Kelly Blue Book or a similar reliable valuation service and look for the price you would expect to pay for a car, not what you could trade it in for.  For furniture, there are several reliable online calculators for determining how the sale price of furniture depreciates, if you know when you bought it and what you paid for it.

The Bottom Line.

The U.S. Trustee will want to know that you listed all your property and gave fair valuations.  She will likely ask you about it, and in any event, you must swear an oath that the property you have listed is complete and accurate.  Be prepared to explain how you ascertained the value.  The more complete and accurate your property listing is, the quicker your attorney can prepare your petition, and it will make the entire bankruptcy process move along more smoothly.

How does the bankruptcy process work in South Dakota?

What can you expect when you are considering filing bankruptcy?  Below is a brief outline of a typical Chapter 7 Bankruptcy case.

1. First, any person considering bankruptcy, or avoiding bankruptcy, should consult with a bankruptcy attorney.  He or she will be able to advise you of the opportunities and potential pitfalls of filing for bankruptcy (there are plenty of both in every case).
2. Next, the attorney will usually discuss the fees, when they are due, how he or she accepts payment, and so forth.  Typically fees are due up front in a bankruptcy case because the risk that amounts owed to the attorney are discharged along with other debts.  Total costs for bankruptcy can range from $1500 to $2500 (or more if the case becomes substantially complex).  I typically charge in the range of $1400 to $1800 (I pay the filing fee so that amount is included) depending on how many “reaffirmation agreements” I will need to do.
3. Your attorney will usually provide you with a lengthy questionnaire to fill out.  In my practice, I give clients the option of filling out traditional paper questionnaires and returning them to my office, or I can send them a link to a secure page where they can input information from a computer.  These forms require you to collect bank statements, tax returns, pay stubs, letters from creditors and collection agencies, and other items.  You will also need to go through your bank statements and figure out what your monthly expenses are, and put together a list of the property you own.  The list of property should include everything from your house, to your retirement accounts, to silverware you inherited from your grandmother, to the television in your living room.  The intake process can take a while and requires some work, but it is worth it to be thorough and provide your attorney with complete and accurate information.
4. Most likely, your attorney will utilize sophisticated (and expensive) software to analyze the information you have provided to determine bankruptcy strategy, qualification, and whether or not your pass the “means test.”  The means test is a very complicated formula in the bankruptcy code designed to prevent people from filing bankruptcy who Congress believes are capable of paying their debts.  If you do not “pass” the means test, your case may be dismissed or converted to a Chapter 13.
5. Your attorney may follow up with you after you turn in the questionnaire.  It is important you provide any additional information or documents to your attorney, because he or she will use that information to draft the petition that will be filed with the court.  Using incomplete or inaccurate information in a Petition can get both you and your attorney in trouble, and sometimes can result in criminal charges, so it is important to be very careful and thorough.
6. Before your attorney can file the petition, you will need to take a “Credit Counseling” course.  They rarely cost more than $20 (the provider I partner with charges $9.95).  Your attorney will provide you with a list of approved providers.  The course can be completed in a few hours or less in person, on the phone, or online.  You will get a certificate of completion which you will need to give to your attorney, unless the vendor will automatically mail one to your attorney.
7. Once the petition is drafted and reviewed by your attorney, and once the Credit Counseling course is completed, you attorney will file the petition with the Bankruptcy Court.  At this time, the U.S. Trustee will mail notice to all the creditors you have listed in the petition.  When they receive the mail from the U.S. Trustee, they are required to stop calling you, writing you, harassing you, garnishing your wages, foreclosing on your house, and so on.  (Sometimes creditors cease contact with as early as the day you tell them you have hired a lawyer and after the creditor has confirmed this representation with the lawyer).
8. Right after you file, you will need to provide your attorney with the next pay stub you receive and your bank statement for the month in which you filed.
9. About one month after your lawyer files the petition, you will attend what is known as the “Meeting of the Creditors” with your lawyer.  There, you will take an oath and answer questions from the Trustee, and creditors – if any show up (it is not often creditors show up).  The Trustee will ask if you have reviewed your petition, if it is accurate, the status of any accumulated overtime or paid vacation, whether you have transferred any large amounts of money to creditors or family members before filing, and a few other questions.  This meeting typically takes 15 to 20 minutes and if your attorney files in Sioux Falls, the meeting will be held at the office buildings located at 12th and Main Street, right across the street from the historic Washington Pavilion.
10. About two months after the Meeting of the Creditors (aka the “341 Meeting”), assuming everything is accurate and no creditors are contesting their discharge, the Bankruptcy Judge will enter an order discharging certain debts.  Unsecured debts will be wiped out.  Secured debts, such as a loan with a mortgage or a loan secured by title of your car, will remain.  Student loan debts are almost never discharged.  For policy reason, some types of debt, e.g. child support or damages caused by drunk driving, will not be discharged.
11. If you have too much valuable property, the U.S. Trustee may sell some of it in order to pay creditors.  If you have a substantial amount of valuables, or an expensive house with a mortgage paid down, you will need to work hard with your attorney and make some tough choices about the fate of your property in a Chapter 7 Bankruptcy.  You may need to consider Chapter 13.
12. Not all South Dakota bankruptcy cases are clean and simple.  Some involve extensive litigation and some can cost a substantial amount of money.  Each case is a unique case, and there are obviously varying levels of complexity.  Even simple cases involve a lot of risk and a lot of difficult legal concepts, and under no circumstances would I advise a person to attempt to file bankruptcy without the assistance of a bankruptcy attorney.

View my South Dakota Bankruptcy website for more information.  Feel free to write, e-mail, or call me if you have any questions!

~ Jack Nichols

What happens to personal property in a South Dakota Chapter 7 bankruptcy?

You may be wondering what happens to your belongings other than your house when you file chapter 7, or your personal property.  (The legal term “personal property” effectively refers things you own, including money, that is not land or buildings.)  As you may be aware, in a Chapter 7 bankruptcy, the trustee generally takes legal ownership of your property and liquidates it to pay off your creditors as much as possible.  Therefore, unless specifically exempted by Federal law or South Dakota law, your property will generally be sold to pay creditors.   Federal law and South Dakota law “exempts” certain types of personal property, meaning you get to keep it – the trustee is not allowed to sell it to pay your creditors.

Let’s take a look at some of the common categories of personal property that are protected by South Dakota law first, and then we will turn to federal exemptions.

First off, there are certain family items that are so personal in nature that out of good policy, they are exempted by South Dakota law.  This category includes family pictures, the family Bible, burial plots, books used for education, food and fuel (up to a year’s supply), and your clothing.  Also, all other books you or your family own are protected, up to $200 in value.   South Dakota law also protects any pew or seats you own in a house of worship.

A second important exemption is sometimes referred to as the “wild card” exemption in bankruptcy law.  South Dakota permits a “head of a family” to exempt $7,000 worth of personal property of her choosing.  So to the extent personal property is not completely covered by other exemptions (say for example, a car), then the head of household can dole out $7,000 worth of exemptions to those pieces of personal property.  If you are not a “head of a family” as that concept is defined by law, then your wild card is $5,000.

Turning to federal law, the common exemptions include Social Security benefits, veterans benefits, alimony and child support, and retirement accounts such as IRAs, Roth IRAs, 401(k)s, Keoghs, and other similar plans – but for IRAs and Roth IRAs only $1,245,475 is exempted.

For more information, visit my website.

This is only general information about bankruptcy in South Dakota.  For specific legal advice for your situation, contact a South Dakota bankruptcy attorney.  The law is always changing, and may have changed after the date of this post.

 

What happens to my house in a Chapter 7 bankruptcy in South Dakota?

Even though a bankruptcy is a proceeding in federal court, the way your house will be treated depends on state law.  South Dakota law generally exempts the “homestead” from creditors, and this exemption is applicable in bankruptcy.  What this means is that the trustee in a bankruptcy proceeding will not sell your home to pay creditors so long as the equity in your home is not more than $60,000.  In the situation where you do have more equity in your home, talk to us right away about your options.

Under South Dakota law, the “homestead” house must be “used as a home by the owner thereof.”  The key idea in this requirement is that a home is different from a house.  It has to be the place you or your family live.  The homestead exemption will not apply to vacation homes or rental properties.

Also, the size of your lot may be an issue in South Dakota.  If your house is in town, you will be limited to a one-acre piece of land.  If you live in the country, you are limited to 160 acres.

If you have a mortgage on your home, you will need to be current on your payments to save your house.  Even when the trustee will not sell your house in bankruptcy, a lender who has a mortgage in your house can petition the bankruptcy court to foreclose.

If you are behind on your mortgage payments, consider filing a Chapter 13 Bankruptcy.

If you have any questions about bankruptcy filings in South Dakota, I am a licensed South Dakota and bankruptcy attorney and I would be happy to answer any other questions you have!  E-mail me at jack@nicholsrabuck.com.

This is intended as information about South Dakota and bankruptcy law.  It is not intended as legal advice.  Everyone’s facts and circumstances are different.

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