Filing for personal bankruptcy can be a daunting process, particularly when it comes to deciding the fate of your assets. A common misconception is that declaring bankruptcy means losing all your assets. However, the “keep and pay” method in personal bankruptcy offers a viable way to retain assets like your vehicle, while managing your financial recovery. This approach, available under both Chapter 13 and Chapter 7 bankruptcy in Louisiana, allows debtors to keep certain secured assets and continue making payments on them, even as they seek relief from other debts.
“Keep and Pay” in Bankruptcy
When facing personal bankruptcy, it’s crucial to understand the distinction between exempt and non-exempt properties. Exempt properties, which often include essential items like clothing, basic household furnishings, and tools necessary for your profession, are protected under bankruptcy law; they cannot be seized by creditors or the bankruptcy trustee to satisfy debt obligations. This legal protection ensures that you retain the basic necessities of life despite undergoing financial upheaval.
However, not all assets fall under these exemptions. High-value items such as vehicles, real estate, and expensive jewelry might exceed the exemption limits set by bankruptcy law in Louisiana. In such cases, the “keep and pay” agreement becomes a viable option for retaining these valuable but non-exempt assets.
The Process of “Keep and Pay”
The “keep and pay” process involves working closely with your bankruptcy trustee to make sure everything is fair. Here’s how they’ll help you determine the value of your property and set up a payment plan:
Valuation of Assets
The first step in the “keep and pay” approach involves assessing the fair market value of the assets you wish to retain. Your bankruptcy trustee, who administers the bankruptcy process, will assist in this valuation. This might require professional appraisals or market analysis to determine an accurate value for items such as cars, homes, or high-end electronics.
Payment Agreement
Once the value is established, you and the trustee will agree on a repayment plan. This plan outlines how you will repay the value of the non-exempt assets over a specified period, which usually coincides with the duration of the bankruptcy process. The aim is to repay the fair market value of the asset, thereby allowing you to keep it.
Handling Secured vs. Unsecured Debts
In bankruptcy, debts are classified as either secured or unsecured. Secured debts are directly tied to collateral, such as a car loan secured by the car itself or a home mortgage secured by the residential property. Under “keep and pay,” secured assets are typically retained by continuing to make regular payments directly to the creditor, based on renegotiated terms if necessary. This is distinct from how unsecured debts, like credit card balances, are treated; these are typically resolved through the bankruptcy’s discharge provisions without direct repayment plans tied to specific assets.
The “keep and pay” method serves as a strategic option for those in bankruptcy who wish to retain certain non-exempt assets while still complying with legal requirements to address their debts. This strategy requires careful financial planning and legal advice to ensure that the repayments are manageable and that the overall benefits of bankruptcy—such as debt relief and financial rehabilitation—are realized.
At Diment & Associates, we are adept at navigating the subtleties of bankruptcy procedures and can help you understand how “keep and pay” might fit into your personalized bankruptcy strategy. Whether it’s safeguarding a family vehicle or retaining a cherished personal item, our team of bankruptcy attorneys in New Orleans is here to assist every step of the way.
Benefits and Considerations
The “keep and pay” method in bankruptcy provides significant benefits, especially for those looking to retain essential assets during a financially turbulent period. One of the primary advantages of this strategy is the ability to preserve property that is crucial to your day-to-day life and livelihood. By agreeing to pay the fair market value of these assets, you can continue to use them without interruption. This is particularly beneficial for items like vehicles or professional equipment that are necessary for maintaining employment and stable income.
Another key benefit relates to the impact on your credit. While undergoing bankruptcy will inherently affect your credit score, adhering to a “keep and pay” agreement and making timely payments can demonstrate responsible financial behavior. This commitment to fulfilling payment agreements can positively influence your credit history during the repayment period, potentially aiding in the faster recovery of your credit standing post-bankruptcy.
However, there are important considerations and limitations to bear in mind. Bankruptcy laws are not uniform and vary significantly by state. In Louisiana, specific rules govern the use of “keep and pay,” and understanding these nuances is crucial.
Additionally, it’s important to recognize that not all assets are eligible for “keep and pay.” High-value luxury items often do not qualify for this arrangement, and even for those that do, the agreement must receive approval from the bankruptcy court. This approval is critical as it confirms that the repayment terms are fair and that the overall bankruptcy plan remains feasible.
Moving Forward with Diment & Associates
Choosing the right path in bankruptcy is crucial for a successful financial reset. The “keep and pay” strategy might be your best option to retain essential assets and reduce the stress associated with overwhelming debt. At Diment & Associates, we are committed to guiding you through each step of your bankruptcy process, ensuring you make informed decisions that align with your long-term financial goals. If you’re looking for support in managing bankruptcy, debt issues, or tax-related matters, contact us today to see how our legal guidance can pave the way to your financial recovery.
