Many in the U.S. are suffering financially as the economy continues to struggle. These are tough times for many and more and more people may be finding that their debt has grown to unmanageable levels. They may seek bankruptcy protection to seek some financial relief. Depending on their available assets, exempt and non-exempt property, and what type of bankruptcy is filed, however, they may need to make some choices about whether bankruptcy is right for them. If it is, they may need to look at what this will mean for some of their assets, such as stocks.
Can You Keep Stocks in Bankruptcy?
Before you initiate bankruptcy proceedings, it is important that you have a clear picture of what the future holds for your assets, such as stocks and other equity holdings. You see, while bankruptcy offers a fresh financial start, it is not without its potential sacrifices. The sacrifices you will need to make will greatly depend on what type of bankruptcy you end up filing. There are two main choices for consumers: Chapter 7 and Chapter 13.
In Chapter 7 bankruptcy, non-exempt assets are liquidated and go towards repaying all or part of your debt. When you start Chapter 7 proceedings, a bankruptcy trustee is tasked with making an inventory of your non-exempt assets. This means that the trustee will designate a dollar amount for these assets and put them up for sale. The sale proceeds go towards satisfying your outstanding debt obligations. Stocks are generally not considered to be “exempt” property as well as other financial assets such as bank accounts, bonds, and cash. This means they are fair game to be liquidated as part of the bankruptcy process. Fortunately, however, other types of investment accounts such as 529 savings plans, as well as retirement accounts like pensions and IRAs, are likely to be shielded in bankruptcy as being deemed exempt assets.
In other words, in Chapter 7 bankruptcy, your stocks are at a solid risk of being sold off and the proceeds used to pay your creditors. Whether an asset will be sold off will depend on a number of factors such as the size of your debt and the non-exempt assets you have available to satisfy outstanding debts. In some cases, you will not need to sell off all non-exempt assets to pay down your debt. In this case, you may be able to retain some of your non-exempt assets such as stocks.
In Chapter 13 bankruptcy, which you may file if you do not qualify for Chapter 7 bankruptcy or for another reason, you pay back your debt in an interest-free, structured repayment plan. With Chapter 13 bankruptcy, your debts are not discharged but are instead addressed in a repayment plan laid out over three to five years. The trade-off, however, is that you will likely be able to retain your assets, both exempt and nonexempt. It should be noted, however, that should you be unable to keep up with your repayment plan, you may need to sell off assets such as your stocks to remain current under the terms of your repayment plan.
Miami Valley Bankruptcy Attorneys
The decision to declare bankruptcy is complicated and important as it can have significant impacts on your financial future. While you may need to sell off assets, you stand to gain the financial freedom that can come with seeing your debts discharged. Miami Valley Bankruptcy is here to discuss your options with you. Contact us today.