Most people consider their pets to be members of the family, but, in a bankruptcy, the law views your furry companions as assets that you own. One need not be a bankruptcy attorney to know that the laws surrounding bankruptcy are complex, but when it comes to the issue of pets, the rules are even more involved. The good news is that the vast majority of bankruptcy courts are not interested in taking your animals from you. Still, it can be helpful to know how pets figure into one's bankruptcy filing.

Chapter 7 Bankruptcy

Under Chapter 7 bankruptcy, most unsecured debts are eliminated by the courts. Before filing, you have to submit a comprehensive inventory of all your assets. It is on Line 13 of Schedule A/B that a filer must list all non-farm animals they own. Virtually all household pets have no monetary value, so you can safely assign them a $0 value or nominal value.  They should be listed though. 

However, there instances were non farm animals can be very valuable.  A potential issue arises when pets are utilized as a source of income, such as a purebred horse that you make money from studding or an exotic cat that you show professionally. Again, the courts are likely not going to confiscate the animal. But if you want to keep it, you have to list it and give it a fair market value.  This is the value that any ready willing and able buyer would pay for your animal.  The good news is you may be able to exempt the animal and stay in a Chapter 7.  Or you might have to pay the Bankruptcy Trustee a portion of the value of the animal you can’t exempt.  However, if you cannot exempt the animal at all you still may keep it if you switch from a Chapter 7 (liquidation of debt) to a Chapter 13 (repayment plan) bankruptcy, which allows you to retain assets you can’t exempt like valuable pets.

Chapter 13 Bankruptcy

Chapter 13 is a debt reorganization and consolidation in which you repay what is owed rather than have it eliminated by the courts. This type of bankruptcy lets you keep assets so long as you can stay on top of both current expenses relating to the asset and past expenses that are part of the monthly Chapter 13 repayment plan. The average household pet owner can almost always keep their pets in Chapter 13.

One possible roadblock would be a pet that has special needs and special care requirements that cost the owner a substantial amount of money. In Chapter 13, you must establish that you have the resources to pay back what is owed AND pay all current expenses. If you have a dog that requires $1,000 a month in specialized care, that is a major financial burden for most people.

There's really no need to be concerned that you are going to lose a beloved pet in a bankruptcy. But they still need to be claimed as an asset, and certain circumstances like the ones mentioned above do involve some additional safeguards. Bankruptcy attorney Sean O'Neill of the O'Neill Law Firm, LLC is here to help. For over 20 years, he has been representing La Crosse County, Wisconsin, as a bankruptcy, family, and divorce attorney, as well as a criminal defense lawyer. Schedule a free consultation by calling (608) 519-3551 or visit his website.