What happens to my property?

11 USC § 541 states that when a person files a bankruptcy case “all legal or equitable interests what happens to my property in a chapter 7 bankruptcyof the debtor in property as of the commencement of the case…” are pooled together into a “bankruptcy estate.” 

A trustee is appointed by the court to look at your estate (or property) to determine whether there is anything there that should be sold to pay off your creditors. If a trustee finds that you have property that should be sold to pay off creditors, he will order you to turn over that property to him and he will sell it and use the proceeds to pay your creditors back.

Attorneys use exemptions to protect your property. In Utah, there are dozens of exemptions for personal property. An exemption simply means that Utah lawmakers have decided that certain property cannot be sold for the benefit of creditors and is therefore “exempt” from sale. The most common ones are found in Utah Code Annotated (2012) 78B-5-506.

Essentially, people who file chapter 7 bankruptcies in Utah get $500 in exemption money (per filing spouse) in different categories. $500 for furniture, $500 for sentimental items such as wedding rings etc. There are also other exemptions available for things such as sewing machines, carpets, beds and other necessary items.

78B-5-506.   Value of exempt property — Exemption of implements, professional books, tools, and motor vehicle.
(1) An individual is entitled to exemption of the following property up to an aggregate value of items in each subsection of $500:
(a) sofas, chairs, and related furnishings reasonably necessary for one household;
(b) dining and kitchen tables and chairs reasonably necessary for one household;
(c) animals, books, and musical instruments, if reasonably held for the personal use of the individual or his dependents; and
(d) heirlooms or other items of particular sentimental value to the individual.
(2) An individual is entitled to an exemption, not exceeding $3,500 in aggregate value, of implements, professional books, or tools of his trade.