Help! I Don’t Want the Trustee to Take my Car!
Many of my debtors come to me, and they are panicked about the thought of the trustee in a bankruptcy taking their belongings. Tennessee does not have expansive exemptions, so there is some concern, but, as always, it depends on the situation. Generally speaking, a single debtor is permitted $10,000 worth of assets (this limit is new as of July 1, 2010). This includes the money in your bank accounts, your furniture, and the equity in your car, among other things. Your 401(k), IRA, and clothing come under separate exemption categories and are not included in the $10,000. What the exemption limit means is that, as a debtor, if your assets are worth more than $10,000, the trustee can conceivably come to your house and take your property that exceeds the $10,000 limit. This is a scary thought. Remember though, that actions involving a court do not happen willy-nilly. Rather, the trustee and your attorney will be having discussions about the value of your assets, and you will have more than adequate warning if the trustee needs to come and value your assets to potentially seize them.
Now, some people ask me then, “well, can I just give my car to my mom?” No. You will need to account for any such gifts of assets on your statement of financial affairs. If you sell your assets for a reasonable price and use the money for living expenses, the trustee generally does not take issue with such actions. However, it is generally a bad idea to transfer ownership for a nominal or no price to a relative immediately before filing bankruptcy. The trustee could cite you with committing bankruptcy fraud, and then you would not be granted a discharge and could face stiffer consequences involving the federal courts. Being honest is always the best policy.
Remember that if you have any concerns, please speak with your attorney, who can help you value your assets and explain how the exemptions will apply to your case.