If your television or other media equipment is worth little, then most likely you will be able to keep it in Chapter 7 bankruptcy. However, if your TV, VCR, DVD player, or other media device is worth a lot, or it serves as security for a loan, keeping it may not be automatic.
In Chapter 7 bankruptcy, most or all of your debts are wiped out. In exchange, you must give up certain property to the bankruptcy trustee, who sells it and uses the proceeds to repay your unsecured creditors.
You don’t have to give up all property in your Chapter 7, however. In fact, most Chapter 7 filers give up little or no property. That’s because bankruptcy laws allow you to “exempt” (protect) equity in certain types of property. All states have a set of bankruptcy exemptions, and some of those states allow you to use the federal bankruptcy exemptions instead.
(To learn more about exemptions, including how they work, which exemptions are available to you, what types of property are typically exempt, and more, see the articles in Bankruptcy Exemptions.)
To determine if your television is exempt, you must first figure out its fair market value, given its age and condition. Because personal property tends to lose value quickly, it’s likely that your expensive flat screen TV is worth a lot less than when you first bought it. (For acceptable valuation methods, see How to Value Personal Property in Bankruptcy.)
Next, determine your equity in the TV. If you bought the TV with cash or a credit card, then your equity is the same as the fair market value. However, if you got a loan from the store or a financing company to buy the TV and the TV serves as guarantee for payment (this is called a security agreement), then your equity is the fair market value minus the amount you still owe.
Example. Greg bought a $4,000 TV. He financed this purchase with a loan from the store in the amount of $3,500, with the TV serving as guarantee for payment. The TV is now worth $500 and he still owes $2,000 on the loan. His equity is zero because he owes more than the TV is worth.
Finally, look at the exemptions available to you to determine if you can exempt your equity. If you have no equity, the bankruptcy trustee will not be interested in the TV, since selling it won’t get any money for unsecured creditors (because the trustee would first have to pay the store its loan amount). If you have some equity, but it’s covered by an exemption, then you get to keep the TV.
Example. Maria owns a TV, now worth $200. Her state allows her to exempt up to $2,300 in any type of personal property. She can use part of that $2,300 exemption to protect her TV.
If you have equity in your television or other media equipment that is not exempt, you may still be able to keep it in Chapter 7 bankruptcy. Here’s how:
Abandonment. If, after the trustee sells the TV, repays any creditors with security interests in the TV, and subtracts the costs of sale and the trustee’s commission, there would be little or nothing left, the trustee will “abandon” TV, meaning you get to keep it. To learn more, see Property Abandonment in Chapter 7 Bankruptcy.
Paying the trustee for the TV. You can also offer to buy the television from the bankruptcy trustee, or exchange some of your other exempt property for the TV. The amount to vuy the TV back is usually negotiable.
If a store or financing company has a security interest in your TV (meaning if you don’t make payments, the company can repossess the TV) and you stop making payments, even if your TV is exempt in bankruptcy, the company can eventually repossess the TV.
However, in Chapter 7 bankruptcy, you can “redeem” the TV (buy it back) by paying the financing company the fair market value of the TV. If you do this, you own the TV outright, and your obligation on any loan or security agreement ends.
Example. Greg owns a TV now worth $500. He owes $2,300 to a financing company for the TV. Greg can redeem the TV in Chapter 7 bankruptcy by paying the financing company $500 for the TV. This will end his obligation on the underlying loan.
To learn more about how this works, see Redeeming Property in Chapter 7 Bankruptcy.