How Bankruptcy Can Affect Your Savings Bonds

Many people faced with a financial crisis are not completely out of funds, with money put aside in savings bonds and other assets are still very much in play. When considering bankruptcy as a path forward financially, it is important to understand what type of effects the legal proceedings may have on your savings so that you can make informed decisions about any options you may have.

When you file bankruptcy, any savings bonds and assets that you have become property of the bankruptcy estate and are as such subject to the trustee’s control. The trustee’s role is to ensure that your creditors are not defrauded and that nonexempt assets in your estate are put towards maximizing your creditor’s benefit. A trustee has a financial stake in the process as the more that they recover for the creditors, the more the trustee gets paid, therefore, your savings bonds are at risk.

How Bankruptcy Can Affect Your Savings Bonds

Chapter 7 Bankruptcy & Savings Bonds

Your savings bonds could be in jeopardy if you file for Chapter 7 bankruptcy. Chapter 7 bankruptcy can be a reasonably quick way to end creditor collection efforts and voiding your liability for dischargeable debts. However, this form of bankruptcy is also referred to as “liquidation bankruptcy” as the trustee is charged with liquidating specific assets, such as savings bonds, and paying the creditors with the liquidated funds.

Possible Exemptions

Depending on the state in which you file for Chapter 7 bankruptcy, a portion or all of your savings bonds may be protected from the bankruptcy trustee. Certain state laws allow protection for various amounts of property during the course of bankruptcy, and you must identify the best exemptions for your personal savings bonds. Having a bankruptcy attorney on your case can help you identify the best strategies that can help you protect as much of your savings as you can if you are considering filing Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

If your state’s exemptions prohibit you from the protection you need for your savings bonds and assets, you can consider filing Chapter 13 bankruptcy. Chapter 13 bankruptcy offers protection from creditor’s collection activities yet doesn’t require you from turning savings bonds and certain assets over to the trustee. However, unlike Chapter 7 which is over in a few months, Chapter 13 bankruptcy can last several years before coming to a conclusion, it also requires you to pay debts in payment plans in lieu of turning over your property.

Securing Legal Advice

Seeking the advice of bankruptcy attorneys can help you make the best decisions for your financial situation. At Hedtke Law Firm, we are well versed in bankruptcy law and how it impacts your financial future, and we draw on our expertise to advise you so that you can make the right decisions for you. If you are considering filing for bankruptcy, call us today to schedule a consultation.

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