What Happens If I Don't Pay My Chapter 7 Overages?

By Kevin Owen

Under Chapter 7 bankruptcy, your assets are valued by a court-appointed trustee and sold to pay your creditors. You are able to shield property from sale by invoking legal exemptions to protect personal property, a limited amount of real estate and motor vehicles up to a certain value. If the value of your assets exceeds your eligible exemptions, you must address these overages through your bankruptcy proceedings if you want to keep the property.

Surrendering Assets

If you know at the time you file your petition for Chapter 7 bankruptcy that you are unable to pay for any asset overages, you may choose to surrender the asset in its entirety for sale by the trustee. With this choice you would not be able to retain the asset. Alternatively, if you want to keep a specific asset with an overage, such as a car with a value in excess of an exemption, you could surrender exempt property for sale by the trustee to offset the vehicle's overage.

Buy the Property Back

If you have no other exempt assets to trade with the trustee in a surrender to cover any overages, you have the option in a Chapter 7 bankruptcy to set up a buy back plan with the court. Under property buy back, a 12-month payment plan is established in which you pay the trustee, who in turn pays your creditors, for the overage amount.

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Payment Options

If, after establishing a buy back plan, you are unable to meet the terms of your payment schedule, you may be able to amend the schedule by extending the repayment period. This can be accomplished by filing a motion to amend with the bankruptcy court prior to the court issuing a discharge of your debts and closing your case. The bankruptcy judge will issue a decision on your request based on the circumstances of your case.


Failing to repay your overages under the terms agreed upon in the bankruptcy plan could have severe legal consequences. If you are simply unable to meet the payment obligations despite your good faith efforts to do so, the court could simply seize the property and sell it at auction to pay your creditors. If the court suspects you were fraudulent in your bankruptcy filings, the court could reopen the closed bankruptcy case, reverse the discharge of indebtedness, impose a civil fine and possibly refer you for criminal prosecution.

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Bankruptcy Exemption Requirements

If your debts are out of control and you have little hope of catching up on the bills, you have the option to file for bankruptcy protection. The federal bankruptcy code allows you to file under Chapter 7 or Chapter 13 of the code. In a Chapter 7 bankruptcy filing, a court-appointed trustee seizes your non-exempt property to repay your debts. In a Chapter 13 filing, the trustee sets a repayment schedule, and you are allowed to keep your property. Exemptions are an important consideration in both forms of bankruptcy.

How to Report Income Changes to the Chapter 13 Trustee

By petitioning for a Chapter 13 bankruptcy, you are promising you'll try to clear at least a portion of your outstanding debts. Chapter 13 allows you to keep assets you would have to surrender in a Chapter 7 case; rather than seizing your non-exempt goods, the bankruptcy trustee oversees a repayment plan. The plan is based on your income, so keeping the trustee current with any changes to that income is essential.

What Happens if the Trustee Abandoned an Asset?

The word "abandon" sounds alarming, but it can actually be a good thing in a Chapter 7 bankruptcy. When your trustee decides to abandon an asset, it means he's not going to exercise his right to sell it and use the proceeds to pay off your creditors. This typically happens when assets are encumbered by loans, or when an asset doesn't have much resale value. In either case, the asset wouldn't bring in much money, so a trustee might decline to force the sale.


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