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Can you keep cryptocurrency when filing bankruptcy?

On Behalf of | Jul 1, 2024 | Chapter 13, Chapter 7, Personal Bankruptcy |

In the United States, cryptocurrency is treated differently in bankruptcy cases, depending on various factors, including the type of bankruptcy being filed (e.g., Chapter 7, Chapter 13) and the specific circumstances of the case.

One of the critical questions is whether cryptocurrency constitutes property of the estate. If the cryptocurrency is determined to be the property of the estate, the debtor-in-possession (DIP) could use it to pay off the debt. Another issue is cryptocurrency’s fluctuating value, which can impact a bankruptcy case. For example, the DIP could argue that their cryptocurrency is a commodity and recover the cryptocurrency, which, by the end of the case, may be much more valuable than at the time of the transfer. Any gain accrued benefits the estate.

As with other assets, whether the DIP can keep the cryptocurrency depends upon the type of bankruptcy.

Chapter 7 bankruptcy likely means liquidation

In a Chapter 7 bankruptcy, the bankruptcy trustee liquidates non-exempt assets to pay off creditors. Cryptocurrency could be considered an asset. If any applicable exemptions do not cover the cryptocurrency, it likely needs to be accurately valued and liquidated.

Chapter 13 may allow you to keep it

In a Chapter 13 bankruptcy, debtors create a repayment plan to repay creditors over three to five years. Debtors may be able to keep their assets, including cryptocurrency, as long as they can make the payments required under the plan. If they pay debts in cryptocurrency, the debtor will need to determine the cryptocurrency’s value accurately when repaying creditors.

Each case’s details are different

The circumstances of each case are different, so it’s essential to consult with an experienced bankruptcy attorney to understand what exemptions might be available in your specific situation under New Jersey bankruptcy law. It is advisable to consult with a qualified bankruptcy attorney who can provide guidance based on the specific details of your situation and the applicable laws.


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