Will You Lose Your Cellphone In Bankruptcy?
There are some things that bankruptcy filers absolutely cannot afford to lose in the bankruptcy. One of those things is their cellphones. The good news is that it is highly unlikely that you will lose your cellphone if you file for bankruptcy.
You do have to list your cellphone as an asset on your bankruptcy schedules, and disclose the existence of any cell phone contracts on your schedules. However, that doesn’t mean that the court will take your phone.
Value and Exemptions
Many of us think that our phone has significant value just because we may have paid a lot for it. But the reality is that there is a sparse market for used cell phones, especially ones that are a few generations old. A phone purchased 2-3 years ago for $1,000 may only be worth about $200-$300 today on the open market.
That means that the phone likely doesn’t have enough value for a bankruptcy trustee to have any interest in taking it. It also means that the value of your phone very likely fits within the limits of your bankruptcy exemptions.
In Florida, your personal property exemption is $1,000, but that increases to $4,000 if you do not have a home that you are protecting in bankruptcy (and those numbers double if you are filing as a married couple). That is plenty of room to protect your cell phones.
Cellphones are a Necessity
Bankruptcy trustees also are aware that cellphones are vital instruments—they are no longer the luxury items they may have been considered to be years ago. Many trustees know that the debtor will need the cell phone to facilitate the “fresh start” that the bankruptcy is supposed to provide.
Many of our cell phones are subject to a contract—that is, they aren’t fully paid off, but rather, are paid every month, or else we get to keep them so long as we keep paying our monthly phone bill. That makes them what is known as executory contracts.
Debtors are allowed to keep property that is subject to an executory contract. An executory contract is where both parties have ongoing obligations—in our example, your obligation to keep paying, and the cell phone company’s obligation to keep letting you use the phone and access cell phone service.
If you are current with your plan your cell phone provider cannot punish you for filing for bankruptcy.
You can opt to surrender your cell phone if you so choose. This can be useful if you are paying a lot of money for a phone that is old, not working, or where you just want to be excused from future payments, without penalty.
Chapter 13 and Cellphones
Having a cell phone payment can actually help you in a Chapter 13. It may be considered a necessary expense, lowering the amount of disposable income that you have to pay off creditors. This could lower your monthly payments in a Chapter 13 plan.