Can I Keep My Cell Phone During a Bankruptcy?

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As the coronavirus pandemic continues, many business owners and individuals are struggling to pay their bills. Bankruptcy is a helpful solution for many Florida residents who are unable to pay their bills. Unfortunately, many people are afraid of filing for bankruptcy due to misplaced optimism, myths, or fears. One of the concerns related to bankruptcy involves losing personal property, including cell phones and other technological devices. 

Many of us organize our lives using our cell phones, and the thought of losing one in bankruptcy is troubling. At the Law Offices of Barton P. Levine, we are often asked by clients about whether they will get to keep their cell phones during bankruptcy. Depending on your cell phone contract, you will likely be able to keep your cell phone during and after the bankruptcy process is finalized.

List Your Cell Phone as an Asset

Cell phones are considered assets, and all assets are vulnerable to bankruptcy, especially in a chapter 7 liquidation bankruptcy. However, in most cases, people can keep their cell phones even in a liquidation bankruptcy. Most of us have cell phones today, ranging from flip phones to expensive iPhones. Whatever type of cell phone you have, it is important you list your cell phone as an asset when you file for bankruptcy. List the specific type of phone you have and its fair market value on the appropriate schedule. If you were not sure where to list your cell phone, your bankruptcy lawyer could help you.

Judges No Longer View Cell Phones as Luxury Items

In addition to listing your actual cell phone as an asset, you should list your cell phone contract as a monthly expense. If you are leasing your phone on a payment plan, be sure to include the lease agreement and the monthly expense associated with your cell phone plan. Bankruptcy judges consider cell phone contracts as ordinary expenses because most of us use cell phones and not landlines. Thankfully, judges do not use your cell phones as luxury items anymore.

Even though cell phones, particularly iPhones, are expensive when you first purchase them, they lose their value rapidly after they are out of the box. It simply is not worth the hassle of trying to sell your cell phone for most bankruptcy trustees. Additionally, the bankruptcy court understands that many of us regularly use our cell phones as part of our employment. Many people rely on their cell phones for their work.

Typically, as long as you can stay current on your cell phone contract and continue making your monthly payments, you will be able to keep it. However, if your monthly bill is too expensive for you to pay every month, you may want to get out of your contract. Or your contract may impose significant fees if you decide to cancel your contract early due to not being able to pay your monthly phone bill. 

In most cases, you can cancel executory cell phone contracts during the bankruptcy process, including your personal cell phone plan. We recommend carefully considering whether you would like to continue your cell phone contract or back out of it during the bankruptcy process. If you have questions about what you should do, our skilled bankruptcy lawyers can help walk you through the pros and cons.

Exempting Your Cell Phone Expenses 

During a Chapter 7 bankruptcy, the bankruptcy trustee will sell or liquidate any of your property that is not exempt to pay your creditors. Under Florida’s Constitution, you can accept up to $1,000 of your personal property during a bankruptcy. You can also exempt up to $4,000 of any property type using Florida’s wildcard exemption as long as you do not use the homestead exemption. You can exempt the value of your cell phone under Florida law.

What happens if you have already used your $1,000 personal property exemption on something else and you cannot use the wildcard exemption? In most cases, the trustee will not sell all of your non-exempt personal property. It takes them significant time and money to sell your assets. Most trustees will not try to sell your cell phone because it will not garner enough money to make the process of selling it worthwhile to the trustee. It is highly unusual for a bankruptcy trustee to sell someone’s cell phone.

Keeping Your Cell Phone in a Chapter 13 Bankruptcy

In a Chapter 13 Bankruptcy, the bankruptcy trustee does not sell or liquidate your property to pay off your debtors. Instead, you will work with the bankruptcy court to develop a three-to-five-year repayment plan. This type of bankruptcy is called a reorganization bankruptcy. At the end of the payment plan, you will be able to keep all of your non-exempt property as long as you have made the monthly payments you agreed to make. In other words, if you file for chapter 13 bankruptcy and make your payments, you will be able to keep your cell phone after the bankruptcy is finalized.

Contact a New York Bankruptcy Lawyer Today

Are you unable to pay your bills? Are debt collectors harassing you due to unpaid bills? If so, we recommend speaking to one of the experienced New York City bankruptcy lawyers at the Law Offices of Barton P. Levine. We understand that the stigma associated with bankruptcy prevents many people from filing for bankruptcy when it could help them tremendously. 

Many debtors have unnecessary fears about filing for bankruptcy, such as losing their cell phones. Are empathetic and experienced lawyers can help guide you through what the bankruptcy process looks like so you become more familiar with it. We will also advocate for you to keep as much of your personal property as possible. After reviewing your financial situation, we will recommend which type of bankruptcy filing will work best for you. Contact us today to schedule your initial consultation to learn more about how we can help you.     

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