Many Americans need to have a few things tucked into a self-storage unit. It could be anything from an unused vehicle or winter sports equipment to home business inventory or grandma's heirlooms.
But how might your storage unit be affected if you have to file for bankruptcy? Is it at risk? Are your things protected? Here are a few answers to your questions.
Is Your Storage Unit Part of the Bankruptcy?
The short answer to this question is that, yes, your storage unit's contents are part of the bankruptcy estate. The value of items inside it on the day of the filing can be included in the calculation for liquidation (Chapter 7) bankruptcy or assets in Chapter 13 bankruptcy.
Should You Hide Your Unit?
Some people intentionally—or even unintentionally—fail to notify the bankruptcy court of their storage unit. However, even if there isn't much in it that's of financial value, failure to report it may cause the trustee to think you're trying to commit bankruptcy fraud. You should be open about the unit and the reasons that it's a necessary expense.
Will You Lose Your Stuff?
The big question, of course, is will the court take your stuff? This depends on the bankruptcy and what's in the unit. Many people's storage units have items of relatively low financial value. So, during Chapter 7 bankruptcy, exemptions may cover the value of everything in the unit—particularly if you need to store household goods, such as after downsizing or being evicted.
Chapter 13 is not a liquidation bankruptcy, so your assets are not seized to pay debts. Instead, you work out a repayment plan over a three- to five-year period. So your stored goods are as safe from seizure as the rest of your things.
Will Anyone Look at Your Unit?
The bankruptcy trustee may need to physically examine your storage unit to confirm what you report as its contents and value. Because physically storing assets like cars, jewelry, or even cash off-site is one way people try to hide assets, the trustee may not simply take your word for it.
So be truthful and prepare an inventory if possible. You may also want to organize the unit a little in case you have to show the trustee or their representative around.
Where Should You Start?
Whether you already have a storage unit or you're planning to rent one, start protecting its contents by meeting with an experienced bankruptcy lawyer in your state today.
Contact a local bankruptcy lawyer to learn more.