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LOUISVILLE BANKRUPTCY ATTORNEY

What Is a Bankruptcy Auction?

bankruptcy auction

A person’s finances are extremely personal. Very few things in life are the source of as much calm or as much stress as finances. You’ve probably heard of the term “bankruptcy auction” before, and it might sound like a scary possibility for those considering bankruptcy. These auctions allow outside parties to come in and bid on your belongings for insanely low amounts of money. Cars, valuable items, even houses might be up for grabs. But why exactly do people choose to auction off their possessions? How do these events work?

At O’Bryan Law Offices, we have extensive, in-depth experience in a wide array of bankruptcy cases in Kentucky. Due to our focus on bankruptcy cases, we know better than anyone how to help people get their finances back on track. Our firm exclusively handles bankruptcy and consumer protection cases, and we’ve built an impressive reputation throughout Kentucky and Indiana. If you find yourself in a situation where you’re considering bankruptcy, we’re here to help you through this tough time. Don’t try to go it alone. Give us a call today at 502-400-4020 to schedule your free consultation.

What is a Bankruptcy Auction?

During a Chapter 7 bankruptcy, the person who files essentially decides to liquidate their debt. This process allows that individual to eliminate their debt and start again with their finances. However, it also requires a significant amount of sacrifice in terms of assets or possessions. One option for liquidation of assets is the bankruptcy auction. During one of these auctions, outside parties participate in bidding on your possessions, including cars, valuable items, and even a home in extreme cases. The outside parties view these auctions as an opportunity to acquire expensive items for cheap, but the person whose items are auctioned might feel devastated by the loss of personal belongings. After the auction, all proceeds from the sales go to your creditors. People often sell expensive items first during these events, but anything can be sold.

How Does a Bankruptcy Auction Work?

Bankruptcy auctions operate in two main ways: public auctions and private auctions. In many cases, debtors choose the public auction option when selling their valuable property. Before the auction takes place, the debtor seeks out a “stalking horse” bidder who sets a base price for items. Then, the auction proceeds normally until each item reaches its final auction price. The winners of these items make the highest offers. If the “stalking horse” bidder is not the winner of the item on which they started the bidding process, they usually receive a small fee to cover diligence costs. Debtors can also choose to host private auctions and sales. However, sales that occur outside of an approved course of action usually require court approval.

What is the Difference Between a Bankruptcy Auction and a Foreclosure Sale?

Many people believe that these two events are basically the same thing. While they have their similarities, they are different from each other. They share the same goal of raising the money a debtor needs to pay their creditors. However, the debtor does not receive the profits from the auction in the case of a foreclosure auction. The bank or mortgage holder receives the proceeds. We’d like to note that foreclosure auctions are significantly more rare than bankruptcy auctions. Foreclosure sales, however, are more common. These occur when banks exercise their lien rights to sell homes at auction. In some states, if the home sells for less than its actual value at auction, the bank will sue the foreclosed home’s owner for the monetary difference.

What Should You Do If You are Facing the Possibility of a Bankruptcy Auction?

Struggling with finances is never a fun situation for anyone. If you find yourself facing the possibility of a bankruptcy auction, seek help from an experienced Kentucky bankruptcy lawyer right away. The chances of losing more while trying to go it alone are very high. With the help of an attorney who focuses on bankruptcy cases, you will have a better chance of keeping your house, car, and other valuables. We will also help you fully understand the process while protecting your assets. Depending on your specific situation, you might still lose your home or car. However, there are sometimes options to avoid this result. 

How Does Claiming Bankruptcy in Kentucky Affect Your Children?

As a parent, you probably feel extremely protective of your children and their wellbeing, as most parents do. Considering bankruptcy while you have children adds considerable stress to the process, especially if you worry about the effect on their future. In this section, we explain the possibilities of how bankruptcy filing might affect your children.

Let’s consider first that you have children under the age of 18. In this case, your child does not legally have their own possessions. This means that everything they “have” is still yours from a legal standpoint. Technically, a bankruptcy trustee may legally take these possessions. However, this is very unlikely. Items such as children’s toys or clothes rarely have enough resale value to justify taking these items. Valuable items, such as collector’s edition toys, cars in your name, or autographed items, however, the trustee might use these items to pay your debts. In terms of bank accounts for minors, a trustee is very unlikely to have interest in these accounts unless you deposited large sums of money into it to avoid paying creditors.

In some Chapter 7 bankruptcy cases, your child’s work income is considered in the means test. The means test exists to determine if you have too much income to file for bankruptcy. Generally, this only occurs if their income contributes to paying household expenses. In most cases, your child’s income goes toward their own recreational activities, and thus is not considered in the means test. 

Contact Louisville Bankruptcy Lawyers if You’re Concerned Your Possessions Will Be Sold at Auction

If you find yourself experiencing financial difficulties and need a Chapter 7 or Chapter 13 bankruptcy lawyer in Kentucky, the O’Bryan Law Offices are here to help. As Louisville’s top bankruptcy law firm, we focus on helping people file for bankruptcy in order to get their financial lives back on track. In other words, you’ve come to the right place. Our founder, Julie O’Bryan, built a team of legal professionals who manage specific cases for clients. These cases range from foreclosure and tax obligations to business restructuring and different types of bankruptcy. For a compassionate Chapter 7 bankruptcy attorney in Kentucky or Indiana, give us a call right away at 502-400-4020. We offer free consultations, along with five convenient locations and accessible hours.

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