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What Happens To My Pet In Bankruptcy?

by Adam Mack, J.D.

When considering bankruptcy, one of the first questions my clients commonly ask is, “What can I keep?” Usually the conversation turns to things like houses, cars, and other assets, though one category is often a surprise. Animals are considered assets too, including household pets. For some of my clients, this is a difficult thing, akin to listing their children as assets, and the mere possibility that their pet could be taken away during a bankruptcy is heartbreaking to them. While it’s not an outright impossibility, it is highly unlikely that someone would lose a pet in bankruptcy.

In hundreds of bankruptcies, I’ve yet to see a trustee show interest in any animal.  There are several reasons for this.  Most household pets don’t have enough monetary value to be worth the trustee’s time and effort.  When a Chapter 7 trustee liquidates the bankruptcy estate, it’s not just done on paper.  He or she has to assume possession of (and responsibility for) all the assets within the estate, store those assets, and find buyers for them.   This would be true for animals, as well.  The trustee must do this for each and every single case he or she is administering. Every pet-owner knows that even a well-behaved animal can be a lot of work, and caring for the pets from just a half-dozen cases would quickly become overwhelming.  Trustees are lawyers, not kennel owners, and would have to either care for the animals themselves or pay someone else to do it for them.  Either way, just a few days of taking care of any seized pets would make the trustee lose money on the deal.  The overwhelming majority of animals listed as assets on bankruptcy petitions are not even given a second thought by the trustee.

Our Kansas bankruptcy courts also have a culture of fairness that would frown on a trustee taking a family pet simply because he or she could, especially in light of the financial reasons I just discussed.  While a trustee might seize a highly-valuable animal (such as a thoroughbred horse or an exotic pet), most trustees would not risk a judge’s ire over the family’s Labrador, tabby, or koi.  Even with highly-valuable animals, trustees have some discretion in terms of how the animals are valued and administered.  As we discussed elsewhere, sometimes Chapter 13 bankruptcy filers can keep even non-exempt assets (like animals) so long as the creditors don’t lose out under the “best interest of the creditors test.”  Basically, that test requires that the creditors receive at least as much money in a chapter 13 as they would have in a chapter 7 for a given asset, so a debtor might have to pay a little extra to keep the highly-valuable animal, but if the debtors can afford it, the trustees are often willing to negotiate.  (An experienced bankruptcy lawyer is invaluable for such negotiations.)

Additionally, if the animal is more than just a pet,  such as if the animal is breeding stock, it can sometimes be claimed under a tools of the trade exemption (but only if that’s your primary source of income).

The most important take-away from all this is that, even though some assets like pets are not exempt, an experienced Kansas bankruptcy lawyer can help you protect those things that are most important to you throughout the filing process.