What Happens to Pets in Bankruptcy?

When a person is in a rough financial situation, they may consider bankruptcy. While bankruptcy can help you get a fresh start financially, it can affect your assets. You may need to liquidate your assets so you can pay back your creditors. This means your home, cars, electronics, artwork, and jewelry may need to be sold. But what about your pets? Will you need to give up your cats and dogs?

This has always been a complex issue under Maryland law. Domestic animals are considered a unique form of property in the state. Even though they are living things, and most pet owners would consider their furry and feathered friends to be more like family members, pets are generally considered personal property in bankruptcy and divorce proceedings. 

Does your pet have monetary value?

The law states that pets are technically considered part of the bankruptcy estate since they are property. However, they are usually protected because their value is insignificant, and they realistically cannot be liquidated. Dogs, cats, rodents, and fish may be valuable to their owners but not to the court or the creditors. This means that most people filing for bankruptcy can keep their pets.

Rare Animals

However, there are some exceptions. Purebred or rare animals with high value could be vulnerable to liquidation. These include show dogs, exotic pets, and large animals. These animals tend to have a high value, which makes them a valuable asset during bankruptcy, unlike your typical mutt from the pound.

Animals Used for Commercial Purposes

Also, it should be noted that not all animals are considered pets. Farm animals and animals used for commercial purposes are often exempt from Chapter 7 bankruptcy because they are necessary for the owner’s income. Even animals such as horses that are used as therapy animals for children are part of a business model and are not simply pets.

Pet Care

Pet care is not factored into the total value of a pet, even though some animals require specialty foods and are generally expensive to care for. While pet care is not necessarily an important factor during Chapter 7, it could be in a Chapter 13 bankruptcy.

While Chapter 13 bankruptcy does not involve liquidation, it does require a person to make a list of their earnings and costs, which include pet care. If the amount necessary to care for a pet is more than the pet’s value, the court may order that the owner sell the animal. This is negotiable in most cases, though, especially if repayment of the debt can be restructured in some other way. 

Bankruptcy is not without its implications. Many people are concerned about their assets, including their pets. In most bankruptcy cases, pets are not sold or taken away. Additionally, in Chapter 7 bankruptcy, trustees typically focus on valuable assets that can be used to pay off debts, and pets do not generally fall into that category. However, if there are significant expenses associated with the care of a pet (like luxury animals with high upkeep costs), those expenses might come up in the bankruptcy proceedings.

In Chapter 13 bankruptcy, you create a repayment plan to manage your debts, and it is unlikely that pet-related issues will affect your plan unless their care involves substantial financial costs.

The Law Offices of Adam M. Freiman specializes in bankruptcy in Maryland. Adam can answer your questions about bankruptcy and how your pets and other assets are affected.