Sounds crazy? Recently, I read an article about a guy who had consulted with a bankruptcy attorney who told him that it was possible that his creditors could sell his assets.

After the intial consultation, this guy went home and thought about the bankruptcy process and its implications. He was in debt up to his eye balls, lost his job and was under a lot of financial distress, but the attorney’s statement about selling assets began troubling him since he did not have much stuff (legal term for “assets”).

He began mentally obsessing about the possiblity of his creditors showing up at his door to sell his dog. Mental obsession and fear are actually a very common attribute of individuals and families facing tough financial situations, including choosing to talk with a bankruptcy lawyer.  They begin to focus in on their greatest fears: threats from creditors; calls from creditors at work; losing retirement benefits; losing their home etc.

This was the first time I heard about someone fearing the loss of a family pet to creditors in bankruptcy. As crazy as the possiblity sounds, I completely understand the mindset of fear and misinformation. I see it everyday.

More likely than not the guy didn’t understand that certain things are automatically protected in bankruptcy ( the legal term is “exemptions”) from creditors. In California (each state is different on what you can keep in bankruptcy) you make an election of the type of exemptions apply in your particular case.

If this guy was located in California, and with proper legal advice his dog would be protected from the clutches of his creditors. It was probably never at risk, but the human mind can conjur up some pretty powerful fears.

To clarify, in bankruptcy, the Chapter 7 or 13 trustee is responsible for selling “non-exempt assets”, and so long as the dog was not a rare breed (the dog was a mix) or the guy was not running a dog breeding business with dogs that had championship blood lines, more likely than not the dog would be considered personal property that the trustee would have no interest in trying to sell (even if it could not be “exempted”). 

Two good points to remember: (1) you are not alone if you’re obsessing about your fears and concerns – losing your house, the punch in the stomach ever time the phone rings, job loss or losing prized possessions; (2) getting good advice about your situation – which requires you to discussing your entire financial picture, including your assets (equity in your house, car, boats etc.)

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