Bankruptcy expert Leon Bayer answers real-life questions.
I am considering Chapter 7 bankruptcy and am wondering what will happen to my two pet horses if I file? They are not worth much; I probably couldn’t even give them away. But I don’t want to file bankruptcy if I have to give them up.
There are a few issues that arise when you file for Chapter 7 bankruptcy and have horses or other household pets. The first is whether the bankruptcy trustee will sell the horses and use the proceeds to repay your creditors (since your horses aren’t worth much, this is unlikely). The second is whether the bankruptcy trustee will dismiss your Chapter 7 bankruptcy because your pet care expenses are unreasonable.
Your Horses Are Property of the Bankruptcy Estate
When you file for Chapter 7 bankruptcy, all of your assets become property of the bankruptcy estate. This includes all of your personal property, and animals are personal property. However, state and federal law allow you keep certain types of property – called exempt property. The idea is that you shouldn’t be left without basic items for living and working. (Learn how bankruptcy exemptions help you keep property.)
Are Your Pets Exempt Property?
A few states have laws that exempt pets. If you live in one of those states, you may be able to use the exemption to keep your horses.
Most states don’t have a specific exemption for pets, but many have a wildcard exemption. A wildcard exemption allows you to exempt a certain dollar value of any type of personal property. Because your horses aren’t worth much, you may be able to use a wildcard exemption to keep them. (To find out if your state has a pet exemption or wildcard exemption, see Bankruptcy Information for Your State.)
Will the Trustee Abandon Your Horses?
Even if you cannot exempt your horses, the trustee may decide to abandon (not take and sell) them. A trustee will do this if your horses have little value, or because it would be too hard for the trustee to sell them. (Learn more about when a trustee will abandon property in bankruptcy.) In your situation, since your horses aren’t worth much, this is likely to happen.
Keep in mind though, if your horses are valuable (when I say value, I mean market value), the bankruptcy trustee will explore the possibility of selling them.
Are Your Pet Care Expenses Unreasonable?
When you file for bankruptcy, you fill out a number of forms that contain information about your income, expenses, debts, assets, and recent financial transactions. If the bankruptcy trustee feels that your living expenses (listed on a form called Schedule J) are unreasonable high, he or she may ask the court to dismiss your bankruptcy case. Spending money to care for horses could be an issue if the court thinks that money should go to your creditors.
Here’s what the court is likely to look at:
The cost of maintaining your horses. The higher the cost, the more likely the court will balk. For example, if you spend $100 per month on pet care, that is unlikely to be questioned. On the other hand, if you regularly spend $1,000 per month caring for your horses, the court is more likely to toss your case.
The amount of your other expenses. The court is likely to look at your other living expenses as well. If you spend far below average on other things so that you can pay for your horses, that fact will cut in your favor. For example, things like driving a very old, inexpensive car, scrimping on food and utilities, and foregoing any kind of middle class luxury could persuade a trustee to let your case to proceed.
Leon Bayer is a Los Angeles bankruptcy attorney. He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy. The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo. By answering a question on this blog, Mr. Bayer does not become your lawyer.