If you’re like most people considering bankruptcy, this is your first time facing such serious financial struggles. Because of this, it’s normal to have lots of questions about the process. Will you lose your home? How will your credit be affected? What items do you get to keep? Do you get to keep possessions like your cell phone?
The team at Padgett & Robertson understands how confusing this entire process can be, and we’re committed to making it manageable for you. To discuss your case in greater detail and ask questions, call us at 251-342-0264 to set up a meeting.
Your Cell Phone is a Necessary Item
Gone are the days when cell phones were a flashy item that were reserved for executives and people with more money than they could spend. These days, cell phones are basically a necessary part of life. Without one, you can’t talk to your employer, access important services, or stay in touch with loved ones. Fewer and fewer American households still have landline phones, and so cell phones are considered a necessity. This is important, because this does affect how the item is viewed in bankruptcy court.
Cell Phones Are Depreciating Assets
Whether you have a pay-as-you-go flip phone with basic features or a top-of-the-line smartphone, one hard fact is true: your phone is almost certainly not worth as much as it was when you bought it. Cell phones, unlike homes and other types of real estate, are depreciating assets. They start losing value as soon as they find an owner, and because of this, it’s rarely worth the trustee’s time to sell it off and use the proceeds to pay off your creditors.
Even if your phone was an expensive model that cost you over $1,000, its value is likely less than half of what it was when you bought it. One exception: if you bought the phone on a payment plan immediately before filing bankruptcy, the court may suspect that you bought it knowing that you were about to file bankruptcy. This would be considered fraud, and in that case, you may have to give up the phone.
Don’t Forget About Personal Exemptions
Even if your phone is still worth a considerable amount of money, you are still unlikely to lose it in bankruptcy. Every state has exemptions, and there are also federal exemptions you can use. In Alabama, you can claim a $16,450 real property exemption, keep items you use as tools of you trade, and exempt $8,225 of personal property as a wildcard exemption.
Your attorney will help you understand what property falls into each type of exemption and how your exemptions will be structured. Another piece of good news: you don’t have to exempt the phone’s value based on how much you spent on it. You can use its current fair market value. This gives you more space to exempt other assets from bankruptcy.
What About Chapter 13 Bankruptcy?
All of this information assumes that you are filing Chapter 7 bankruptcy. If you qualify for Chapter 13 bankruptcy, you don’t have to be concerned about your phone or other assets. Assets are not sold off during bankruptcy. Instead, you pay off your secured debts and a portion of your unsecured debts over a period of three to five years.
A Bankruptcy Attorney Can Help You
When you start weighing your financial options, you may have a lot of fear about bankruptcy. Many people think they’ll leave the bankruptcy process with nothing but the clothes on their back, but that’s not true. As explained earlier, exemptions ensure that you still have what you need to rebuild after bankruptcy. If you’ve been holding off on bankruptcy out of fear of losing everything you own, it’s time to find out what you stand to gain or lose with bankruptcy.
Choose Padgett & Robertson for Your Bankruptcy Case
Wondering if bankruptcy is the right choice for you and your personal finances? Make some time to talk to Padgett & Robertson about your finances. We’ll answer your questions, review your finances, and help you understand what your options are. Set up a consultation right away by or calling us at 251-342-0264.