Could I lose my pet if I file for bankruptcy?

On Behalf of | Jul 11, 2024 | Bankruptcy

Filing for bankruptcy can impact a debtor’s ownership of certain personal assets, but only under highly specific circumstances. As a result, for pet owners, a common question (understandably) involves whether they could lose their beloved pet during the bankruptcy process. 

Under federal and state bankruptcy laws, pets are generally considered personal property. This means that if you file for bankruptcy, they will be listed as assets. The type of bankruptcy you file – Chapter 7 or Chapter 13 – (in addition to the kind(s) of pet you own) can influence how these assets may be handled.

Chapter 7 vs Chapter 13 bankruptcy

In a Chapter 7 bankruptcy, a trustee is appointed to each case. The trustee assigned to your case is empowered to evaluate and sell your non-exempt assets to pay off creditors. However, the good news for pet owners is that pets are typically not considered valuable assets in monetary terms. It is also very rare – less than 10 percent of cases, by most accounts – that a trustee decides to sell any of a filer’s assets at all. 

Pets usually do not have significant market value, especially when considering their worth beyond monetary terms. Trustees are more focused on assets that can be easily liquidated to pay off debts. It may also be possible to utilize certain exemption categories to shield a pet from a risk of sale in the event that they are exotic, pure-bred or otherwise unusually valuable. 

By contrast, if you choose to file for Chapter 13 bankruptcy, you’ll create a repayment plan to pay off your debts over three to five years. You’ll retain ownership of your assets, including pets, while making payments to creditors based on your disposable income. Since no property is liquidated in a Chapter 13 scenario, you will not lose your pet as long as you adhere to the repayment plan.

Overall, for most pet owners, filing for bankruptcy does not result in the loss of a pet. With that said, if you have questions about your unique circumstances, know that seeking personalized legal guidance is always an option.