Can the trustee take exempted personal property?

[Dirk Squarejaw]

Can someone explain something to me about exemptions? Can the trustee take items that are “exempted” even if there is more than enough from your state’s exemption to cover the actual value of the item? For example, I will be filing Chapter 7 in May and live in Indiana. My exemptions are $15k homestead and $8k wildcard.

I’ve been filling out my paperwork that the lawyer provided where I state my property and assign a value. Using the values that I can find, I’ve been able to cover all my household items, my 10yo motorcycle that is in average shape and a junk/project car that doesn’t run using the NADA guides for the vehicles and garage sale prices for the household goods. And I have about $1500 left over.

So with that said, can the trustee touch any of the stuff as long as it has been valued correctly and fits within the state’s exemption? Like down the line, could he/she decide that they’d like to take my TV or motorcycle? After reading a few horror stories about people losing seemingly exemptable items (like DivorceRuinedMe’s ring), I wasn’t sure if they were items that were not protected or if the trustee had the power to take exempted items.

[phoenyx]

As long as an asset is properly fully exempted, they can't touch it.

The trouble that some (not many) people run into is when the trustee either disputes the listed value of an asset, or disputes whether the exemption you used applies to a particular asset.

DivorceRuinedMe had troubles, because she listed her ring valued at what a pawn shop offered her for it, but the trustee disputed that it should be listed at an appraised value. The trustee wound up realizing the ring was not worth as much as the trustee originally thought, and realized it wasn't worth going after.

So, a trustee can't take an exempted asset. What they can do is argue that it isn't fully exempt, and then take it.


Keep in mind that a trustee works on a comission basis. I think it's 10% (but don't quote me on that) that they get for anything they seize and sell for creditors. Unless the asset is worth much more than the exempt amount, it often isn't worth a trustee's time to obtain the item, have it valued, sell the item, etc. What happened in DivorceRunedMe's situation is not the norm, and happened from a trustee that several people have noted as ... not nice.

Also keep in mind that there isn't a huge market for used consumer goods like TV's, and there probably isn't a huge demand for 10 year old motorcycles either, unless it's more of a collector's item.


In the end, if you believe your values and exemptions are correct, you shouldn't worry.

[justplaintired]

I too am in Central Indiana and have the same worries. But by what I have been reading I think we can assume we are safe. We used Kelly Blue Book for valuing our cars (3) all older but not old enough to be collectors. All with high mileage so those value at about $8500.00, We are filing jointly so we get double exemptions. We will be close with household items and lawn mowers......, but fall below the wild card. Have little to no equity in our home. This is all so confusing, no wonder people are afraid to file.

[HHM]

As long as an asset is properly fully exempted, they can't touch it.

The trouble that some (not many) people run into is when the trustee either disputes the listed value of an asset, or disputes whether the exemption you used applies to a particular asset.

DivorceRuinedMe had troubles, because she listed her ring valued at what a pawn shop offered her for it, but the trustee disputed that it should be listed at an appraised value. The trustee wound up realizing the ring was not worth as much as the trustee originally thought, and realized it wasn't worth going after.

So, a trustee can't take an exempted asset. What they can do is argue that it isn't fully exempt, and then take it.


Keep in mind that a trustee works on a comission basis. I think it's 10% (but don't quote me on that) that they get for anything they seize and sell for creditors. Unless the asset is worth much more than the exempt amount, it often isn't worth a trustee's time to obtain the item, have it valued, sell the item, etc. What happened in DivorceRunedMe's situation is not the norm, and happened from a trustee that several people have noted as ... not nice.

Also keep in mind that there isn't a huge market for used consumer goods like TV's, and there probably isn't a huge demand for 10 year old motorcycles either, unless it's more of a collector's item.


In the end, if you believe your values and exemptions are correct, you shouldn't worry.

Could not have explained it better myself,

[DivorceRuinedMe]

Yeah, what phoenyx said about my ring is pretty much what happened. I said the ring was worth $250, she disputed it and told me to get it appraised. Florida only has a measly 1K personal property exemption (NO WILDCARD!!!) and my other posessions pretty much ate that all up leaving the ring unprotected should it be worth anything more than $250. The trustee saw my potentially valuable unprotected ring, along with my tax return as something she could take.

I usually get a very large tax return as I withhold more than I need to each year purposely. I've been planning this bankruptcy since early 07 so I was able to change my exemptions and withhold the proper amount of taxes this year so I'm only getting back a couple of hundred dollars.

When the trustee asked me to get the ring appraised I refused b/c I literally did not have the money to do it at the time. She then was forced to have it appraised and it came in worth $600. When I sent her my tax return and it was only going to be a couple hundred dollars (she thought it would be in the thousands) she came to the conclusion that it wasn't worth it to make my case an asset case for less than $1000.

My situation was a nightmare but that's only b/c Florida SUCKS in terms of personal property exemptions. If you can protect everything and the trustee doesn't dispute your values of anything then you should be golden.

[biotechsolution]

Your exempted and excluded (IRA's, 401(K) and SEP) property are protected from everyone but the IRS.

So has long has you don't owe them you're safe. If you owe the IRS they can take your excluded property up to the value at the time of filing. This one is tricky because if you don't have access to your retirement accounts they don't have anymore right than you. So in theory they would have to wait until your retirement age.

If you had a lien filed against you they what amount you exempted will survive you discharge up to the amount of the lien. Because liens survive a Chapter 7.

[cleo1357]

DivorceRuinedMe, Florida has a $4k wildcard exemption in addition to the $1k personal exemption, but ONLY if you do not claim the homestead exemtion. My husband and I were able to exempt $10k worth of personal property, but we are not keeping our home (very negative equity- no reason to.) Just wanted to calrify.

[DivorceRuinedMe]

DivorceRuinedMe, Florida has a $4k wildcard exemption in addition to the $1k personal exemption, but ONLY if you do not claim the homestead exemtion. My husband and I were able to exempt $10k worth of personal property, but we are not keeping our home (very negative equity- no reason to.) Just wanted to calrify.

Thanks - I knew that but forgot to mention that. I have a house that I'm keeping so in effect, if your house has very little equity (like mine), you are basically screwed with having to use the homstead and only getting the 1K.

[sweet1evie]

I'm in Indiana. Is there a list of property values were allowed to have? My attorney hasn't shown me this and it would help me. Also, I just did cash in my 401 k a month ago and got 1700 for it. It is spent allready partly on the puppy I bought.... but they may think I cashed it so I would not lose it, but instead it was becasue of our economy. I don't trust banks or cash. So since it is gone, it doesn't count against me right!?

[justplaintired]

Indiana allows $15K in home equity, doubled if joint filing, $8K wildcard, this is doubled also if joint filing, this covers cars, household items, lawn mowers, jewelery....., $300.00 cash on hand and in the bank, also doubled if you are joint filing. Kelley blue book for cars. I believe it's FMV you use.

Remember household items are garage sale prices, so just because you think something is valuable doesn't mean you can get that much for it. Basically walk threw your house and ticket it for a sale mentally and write down your figures.

401K loans which you would have I don't believe are discharged. Your 401K is protected in a BK, they couldn't have taken it anyway.

If you are talking about property as in a home, you can get a value by calling a local Realtor and asking them to give you a free estimate on the house, basically what this is, is a price they believe a house comparable to yours would sell for. This it seems by other posters works most of the time.

Good luck, looks like now there is another Indiana filer among us, I am in central Indiana and hope to file within a month or so.

[PoorGrammyinBK7]

DivorceRuinedMe, Florida has a $4k wildcard exemption in addition to the $1k personal exemption, but ONLY if you do not claim the homestead exemtion. My husband and I were able to exempt $10k worth of personal property, but we are not keeping our home (very negative equity- no reason to.) Just wanted to calrify.

This is interesting to me Cleo and I am just finding out about it - will be interested to see how it goes for you. We have decided we want to do this too - (not claim homestead) with negative equity in the home - not that we have as much as $10K in personal stuff, but we might have more than $2K. Just can't see wasting an exemption when there is no value in it. Yiu are in our district too.

Will you try to stay in the home a while, not paying mtg payments or will you have to immediately move out and rent? I heard that you could stay for a while...

[Dennis1971]

Since this thread has a lot to do with Indiana I'll chime in too. I don't know much about BK, we just filed Friday. I am also from central Indiana. The way our attorney put it to us, it matters all lot where your from. He said the southern part of the state is very BK friendly. Luckily when we mentioned where we were from he knew our judge off the top of his head and said he was great to work with. He said northern Indiana is terrible, he said every BK case that they file the trustees battle them with something or other. He said the go into each case knowing they will have to fight over something. Our
401k is protected. As far as your valuables, from everything I gathered from our attorney and others (including this message board), most people set their values to high, just remember what could you get out of your stuff at a yard-sale. Used appliances, and furniture, are not in much demand. Nobody's gonna give you much for used electronics, especially computers.
Good Luck Dennis

[artgood]

"$8K wildcard, this is doubled also if joint filing, this covers cars,"

Won't cover cars IF they are both registered to one person. One has to be in husband's name, and one in wife's name.