Will I Lose My Digital Assets in a Bankruptcy Filing?
Cryptocurrency and other types of digital assets are becoming increasingly common in personal or consumer bankruptcy cases. Indeed, according to an article in the American Bankruptcy Trustee Journal, digital assets have been appearing with more visibility in individual bankruptcy cases since approximately 2019. Since these types of assets are a relatively recent type of asset, they can pose complications for debtors and bankruptcy courts.
If you are planning to file for personal bankruptcy in South Florida, how will the bankruptcy court treat your digital assets? Or, a more pressing question might be: will I lose my digital assets in a bankruptcy filing? In order to answer that question, it will be essential to know the type of individual bankruptcy that you are planning to file for, as well as the amount or value, as well as the type, of your digital assets. Our bankruptcy lawyers in West Palm Beach can explain in more detail.
Understanding Digital Assets and Their Classifications for Bankruptcy Purposes
Digital assets can take various forms. For most people, digital assets means a form of cryptocurrency or a non-fungible token (NFT). The latter generally refers to a type of digital collectible or artwork, although these appear to be waning in popularity. According to the US Department of Justice (DOJ), cryptocurrency seems to be maintaining its popularity among certain individuals and investors, and there are currently more than 2,100 types of cryptocurrencies that can be purchased. These include Bitcoin, which is among the most common types of cryptocurrencies.
Are Digital Assets Exempt in a Bankruptcy Case?
Are digital assets exempt in a personal bankruptcy case? Generally speaking, based on exemptions available under the Florida Statutes, digital assets will only be exempt if a bankruptcy filer elects to use their “wildcard” exemption to exempt these assets. A person can exempt up to $1,000 of personal property of their choosing, or up to $4,000 if they do not use Florida’s homestead exemption.
In a Chapter 13 case, you will never lose your digital assets to liquidation, just as you will not lose any other types of assets — you do not need to be able to exempt assets to keep them, including digital assets. However, any non-exempt digital assets, like other kinds of non-exempt assets, can be included in the calculation for your repayment plan since Chapter 13 is a type of reorganization bankruptcy that requires regular payments over a three-to-five year period of time.
In a personal Chapter 7 filing, any non-exempt digital assets will be subject to liquidation.
Contact Our West Palm Beach Bankruptcy Lawyers for Assistance with Your Bankruptcy Filing Involving Digital Assets
Given that digital assets are relatively recent, there is not a significant history related to the classification and impact of digital assets on a personal bankruptcy case. However, as we discussed above, researchers and legal scholars consistently identify digital assets as part of a person’s bankruptcy estate, which means digital assets can be subject to liquidation in a Chapter 7 case and can be included in the calculation of a Chapter 13 repayment plan. If you have specific questions about your digital assets in relation to your bankruptcy plans, it is essential to obtain legal advice. One of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan Delaney & Eller, PLLC can speak with you today about your financial circumstances and details related to your digital assets. Contact our firm for assistance.
Sources:
papers.ssrn.com/sol3/papers.cfm?abstract_id=4915592
justice.gov/archives/ust/blog/investigating-financial-affairs-debtor-who-has-cryptocurrency
