One of the best reasons to use a bankruptcy attorney when you file bankruptcy is to make sure that you keep as much property as the law allows.
When you file bankruptcy, you’ll have to take account of all your assets. That includes everything from your pots and pans to your retirement account. All of your property will either be exempt or non-exempt. Exempt property is protected. Your creditors can’t touch it. Colorado has exemptions for such things as clothing, household goods, jewelry, vehicles, and many other items (see Colorado Revised Statute Section 13-54-102 for other exemptions). Non-exempt property, unsurprisingly, is just the opposite. The bankruptcy trustee can force you to turnover non-exempt property and then distribute the proceeds from their sale to your creditors.
In Colorado, cash is non-exempt, whether it’s in a bank account, under your mattress, or in your purse. It also doesn’t matter if you give that money to someone to hold when you file. (In fact, doing so can get you into more trouble than that money is probably worth.) If that cash came from wages, however, the trustee can only demand the turnover of 25% of what you had on the day you filed. Also, if the source of funds was exempt, for example if it came from worker’s compensation or Social Security benefits, you’ll be able to keep all of that money, even if it was in your bank account when you filed. On the other hand, if that money came from inheritance, the lottery, or some other source, you’re going to be handing it over to trustee.
This is where a good bankruptcy attorney comes in handy. When I meet with someone for a consultation, I ask them if they own certain common non-exempt items, like cash or season tickets. Later, when I prepare their bankruptcy petition, my clients have to disclose absolutely everything they own. If I discover something that is non-exempt, I explain to my client what could happen if we file. At that point, they can decide whether to convert the non-exempt item to exempt property or go ahead and file and see what the trustee decides. Of course, the other option is to not file. You might make that choice if the value of any non-exempt asset is worth more than the debts you’re hoping to get rid of.
As far as your bank account and cash is concerned, the best course is almost always to make sure that on the day you file your case (actually, let’s spend it by the day before you file just to be sure it’s gone), your cash on hand is as low as possible. Fill up your gas tank or your refrigerator. Pay next month’s car insurance. Get your teeth cleaned. Just make sure it’s gone. My job is to make sure that you keep as much money as possible when you file bankruptcy. Disclose everything to me, and I’m confident I can make that happen.
If you’re thinking about bankruptcy and are unsure whether your property is exempt or non-exempt consider scheduling a free consultation with a bankruptcy attorney. They’re free, confidential, and there is absolutely no obligation that you hire us. Call 303.331.3403 to schedule your consultation or click on the “Schedule Your Free Consultation” box to find a time that works for you.