How to Keep Your Pets in Bankruptcy

A bankruptcy exemption protects your property. But what about your pets? Will you lose your pet in bankruptcy? Almost never. Most people keep pets in bankruptcy. But you need to know a few things about this subject. You’ll feel better knowing you won’t lose your pet if you file bankruptcy.

Ohio’s exemptions cover pets as “animals held primarily for personal, family or household use.” This probably describes your typical pets in most cases. Yet, there are a few issues to watch out for.

How Could You Lose a Pet in Bankruptcy?

Dogs and cats you get from a friend, or the pound, or you buy outright, are considered household pets and are protected by Michigan exemptions, up to a point. Expensive pure-bread specialty animals having a high resale value should be discussed with experienced bankruptcy counsel before filing.

If an animal has a high market value, it might be a problem in chapter 7. The household goods exemption applies to personal pets, but a high market value animal might be considered a business asset. The pet may be worth more than $600. The trustee may want some evidence of value.

For example, a dog might be AKC (American Kennel Club) registered. The dog might be used for breeding or show. Although normally not an issue, we become very attached to our pets. We consider them part of our family. (I even have an office cat!)

Pets We Finance

Even if the pet is not used for breeding or show, it may be an expensive pet. Today, we see more expensive pets financed. A number of my clients financed the purchase of an expensive dog (no cats yet). They want to know if they will keep the pet in bankruptcy.

Pets which we finance are often subject to a “purchase money security interest.” This means that your pet constitutes “security” for the money loaned for the purchase. And, if not paid, the creditor can legally take the collateral. What? Take my family dog? Yes, legally, that could happen.

Does it ever happen? I’ve not seen it yet. A few cases across the country deal with this topic. Most attorneys agree that, legally, the creditor can take the pet unless you reaffirm in a chapter 7 or schedule payment as a secured debt in a chapter 13.

We Keep Pets in Bankruptcy

Keeping your pet in bankruptcy is almost a given. Yet, we see more pets financed, and these issues need careful attention. So, when considering different debt relief options, we leave no stone un-turned, and this means thinking about your pets, as well.

As a result, in the several cases I have had with financed pets, in both chapter 7 and chapter 13, we have not had a single problem keeping the pets. We have kept 100% of these pets for our clients.