Filing for bankruptcy protection involves submitting several forms, called schedules, that provide the court and the trustee with a magnifying glass through which they can inspect your financial affairs. Three of these forms -- Schedules A, B and C -- address your assets. Schedule A deals with real property and Schedule B lists your personal items. Schedule C is the form that allows you to claim exemptions so you can remove some, if not all, of your property from the bankruptcy proceedings so you don’t lose it.
Schedule B isn’t complicated -- it comes with instructions -- but it might be a bit daunting. It asks for information about the personal property you own, and you must list every item. The schedule is broken down into 35 different types of property, with an additional category for anything that doesn’t fit neatly into any of the others. Go into as much detail as possible with each item you’re listing. Your goal is to tell the trustee anything he might want to know about each piece of property you list so he doesn’t have to ask you a lot of questions later. You can download the schedule from the United States Courts website.
Retail Replacement Value
Schedule B also asks you to state how much each item of your property is worth. The bankruptcy code requires that you use “retail replacement value.” This means how much someone might realistically pay you for it in its current condition, not what it would cost you to go out and buy it new. Some property, like jewelry or artwork, might require professional appraisals. You can value other items by checking trade publications, internet sales sites or the local newspaper -- these sources should all tell you what people are paying for similar things in used condition. If you hold title to a piece of property with a co-owner, list only your share of its value. Don’t assume that the court doesn’t want to know about the $25 bottle cap collection you recently started. List it anyway.
Use of Exemptions
Just because you must list everything on Schedule B, this doesn’t necessarily mean that you’ll lose it in the bankruptcy. If you file for Chapter 13 protection, your property isn’t at risk for liquidation. If you file for Chapter 7, you can apply exemptions to what you own to safeguard it against sale. The federal government offers one list of exemptions and each state has its own. If your car is worth $2,000 and you can use a $2,000 exemption to protect it, the trustee can’t sell it to pay your creditors. You must still list property you believe is exempt on Schedule B, but then you can tell the court that you’re claiming an exemption for it on Schedule C.
Effect of Omissions
Exemptions typically protect assets that are necessary and fundamental to life or earning a living. The federal list and some states offer wildcard exemptions that you can use on anything you like, but these can be limited. Unfortunately, if your grandmother left you her prized Picasso, you may not be able to exempt it from the proceedings if you can’t use a wildcard exemption -- and even if you can, the exemption probably won’t cover its entire value. Resist the urge not to mention it on Schedule C so you don’t lose it -- or worse, to give it to a trusted family member before you file for bankruptcy protection. This is fraud and it could get you into serious trouble with the court.