One of the things they teach you as a a child is that if you can’t pay your bills and file for bankruptcy, the government comes in and takes away your things and sells them, distributes the money to the people you owe, and then, if you still owe money on top of that, the government bangs a gavel and <poof> go the rest of your debts.
In later years, I learned that personal bankruptcies in the US are generally Chapter 7 and Chapter 13. Chapter 7 is more powerful in terms of destroying debt but it carries a greater risk of losing more property. In theory, a person who files is supposed to lose all non-exempt personal property, but it looks like in practice they generally only lose cash, stocks, highly valuable jewelry, and home and car equity above a certain amount (i.e. your car or home gets sold if you have more than X equity in them, if not, you get to keep them). In practice, miscellaneous household stuff is shoehorned into the person’s exemption or conveniently ignored (de minimis non curat lex and all that). The government almost never comes in and carts away furniture, clothing, or kitchenware.
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Does seizure and sale of ordinary, garden variety household stuff in bankruptcy ever actually happen in the US (or anywhere?)*. For example, are there government shops out there where you can browse racks of old Levi’s jeans, dresses from JC Penney’s, flatware forks and spoons, pots and pans, paperback novels, half-used bottles of aspirin, vintage 1998 TV’s, oven mitts, used mattresses, shower curtains, and other miscellaneous household effects previously owned by bankrupt citizens and buy three ice cube trays for $3 and bid $5 on a bed frame? Do seized household goods ever go to the armed services, public schools, or other government service? E.g. “My elementary school served us lunch with a large collection of mismatched plates, forks, and spoons that had been taken from local bankrupt residents over a period of several years. My aunt always bought pink towels and embroidered her name on them - after she filed for bankruptcy I started to see cops wiping their cruisers with them.”
It’s hard to imagine that it would be worthwhile, after the trouble and expense of organizing and transporting them. But that step can be skipped by having some sort of sale in the home itself. Sort of like an indoor garage sale, where everyone walks through the home, takes what they like, and offers a price to whoever is running the show.
I have vague recollections of this exact sort of thing happening to some celebrities who went bankrupt and/or had gigantic tax bills. I can’t remember any names, but maybe this will jog someone’s memory.
I think the issue would be that “personal item X owned by Y” would have more value than a random garage sale dress or blender, for example if teh owner was a famous movie star.
IIRC, personal items below a certain value are exempt; but if you have something valuable it might be seized. (I.e. they won’t come take your copy of “Terminator 3” but having a collection of 5,000 DVDs might mean the collection is considered sufficiently valuable as a whole to be taken and sold off.) Items of significant value - jewelry, mink fur coat, gold coin collection, etc. - might be fair game. However, they aren’t going to leave you with just one pair of underwear and one pair of pants.
Also note that bankrupts love Florida because any size of home is exempt, for example. This is why OJ Simpson lived there - the big house he lived in was immune from seizure no matter how much he owed. Different states have different exemptions for some possessions.
I used to have a link to the trustee’s auction site for the State of Connecticut, but can’t find it quickly. And there are stores in Maine called “Chapter 13” but I don’t know if they are directly related to the bankruptcy courts.
The federal bankruptcy exemptions for Chapter 7 bankruptcy allow $1,450 for jewelry. There is no special exemption for wedding rings. However, each state may have their own exemptions and in some states you can choose whether to use the federal list or state list.
I filed for bankrupty in 2001 and I had NO valuable assets. No car, no expensive jewellery, no savings/RRSP/bonds whatever and I lived in a cheap-rent apartment. No they did not take all my “stuff”. I had to make biweekly payments - I forget what the exact amount was - to pay for the bankruptcy itself and my student loans were not included in the bankruptcy amount. (Too many people going to post-secondary school and then declaring bankruptcy upon graduation to avoid paying back, apparently.) This was in Ontario, Canada.
FWIW, I BK’ed about three years ago and Best Buy sent me a letter saying they wanted their TV back. My lawyer just laughed and told me to ignore it. This was California. They were the only ones who kicked up a fuss—nobody else even bothered to show up for the formal hearing.
How can states have different rules for bankruptcy? In the US, it’s a function of the federal government which is specifically mentioned in the Constitution. Bankruptcy courts are all federal courts. By what legal right do states get to make their own rules about it?
Bankruptcy is complicated. The 1978 federal bankruptcy code lays out the procedures which bankruptcy courts follow. However, the disposition of property under those procedures is generally informed by state law, to which the bankruptcy code defers in several places.