Even the Family Dog Must Be Disclosed
All of a person's assets and all of a person's expenses are listed and accounted for in a Chapter 7 or Chapter 13 bankruptcy petition. A pet is both an asset and, as every pet-owner knows, an expense. The question is, then: how valuable an asset or how high an expense is a family pet?
Pets as Personal Assets
All assets must be listed in your bankruptcy petition, and even a family pet is an asset, or personal property. In order for an asset not to be seized and sold off by the Chapter 7 Trustee in a Chapter 7 bankruptcy, it must be "exempted" (protected) by the application of an exemption to the property up to its full fair market value ("exemptions" are parts of the US Bankruptcy Code statute which allow certain types of property up to certain dollar value limits to be removed from the "bankruptcy estate" otherwise containing all of the filing debtor's property that is created automatically upon filing of the bankruptcy petition---and, thus, protected from liquidation as a Chapter 7 Trustee can only liquidate property in the bankruptcy estate). Most of the time, for common family pets, that value is pretty much zero. And, therefore, pet owners need not fear that their cat or dog or hamster will be liquidated by the Chapter 7 Trustee. But they do need to be listed. The bankruptcy petition is comprised of the same forms for a Chapter 7 filed by an individual person as would be used, for instance, for a family farm filing a Chapter 12 bankruptcy. While the individual in a Chapter 7 may only have a dog or a cat with negligible value, a farm might have livestock or other animals worth a considerable amount of money. Simply because an asset has no or little value does not mean it does not need to be listed.
Pets as Monthly Expenses
On the up-side, pets also represent regular monthly expenses. The pet listed on one schedule as property also supports the need for a monthly average expense for food and veterinary care and other attendant costs on another schedule of the petition which calculates all regular, necessary household expenses. Why is this good? In a Chapter 7, too few expenses relative to your income can result in a motion filed by the US Trustee (the division of the US Department of Justice that monitors Chapter 7 income-based eligibility, among other things) for reasons of "bad faith." That is, for the reason that you appear to have enough money left over at the end of the average month to be able to pay something back to your creditors in a Chapter 13 bankruptcy (in which you repay some of what you owe through a payment plan over 3-5 years), even if it's only 1-2% of your total debt, rather than the 0% you repay in a Chapter 7 bankruptcy. More expenses, so long as they are honest, necessary, and not "inflated" in any way, will help to ensure that your Chapter 7 bankruptcy is not dismissed or converted to a Chapter 13. In a Chapter 13 bankruptcy, what you pay to your creditors through the Chapter 13 Trustee every month, is the difference between your average income and average expenses, generally. More expenses mean a lower Chapter 13 plan payment. However, you can't list the expense if you don't list the pet!
Pets in Bankruptcy: The Bottom Line
An experienced Michigan bankruptcy lawyer will require this pet-related information to divulged to him or her and disclosed in the petition. Beware of bankruptcy attorneys who tell you that "no one cares" about your pet and that they need not be listed, or, worse, who never ask in the first place. If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.
If you enjoyed reading "Pets in Bankruptcy: Both Assets and Expenses," please browse our other articles on our main Michigan Bankruptcy Blog.