Cryptocurrency is a relatively new form of currency that has been increasing in popularity in recent years. While some people view it as a risky investment, others see it as a way to make money. How does cryptocurrency work? How is it treated in bankruptcy? Our Los Angeles bankruptcy team will provide a detailed overview of how cryptocurrency is handled during bankruptcy in California.
In recent years, cryptocurrency has become increasingly popular as a form of currency. While some people view it as a risky investment, others see it as a way to make money.
Cryptography secures transactions and controls the creation of new currency units in cryptocurrencies. Since cryptocurrency is decentralized, it cannot be controlled by governments or financial institutions. It was in 2009 that Bitcoin, the first and most well-known cryptocurrency, was created. Cryptocurrencies are often bought and sold on exchanges and can also be used to purchase goods and services.
So, how does cryptocurrency affect my bankruptcy filing? Cryptocurrency is considered an asset in bankruptcy. If you have cryptocurrency, the bankruptcy trustee may sell your cryptocurrency to pay your creditors.
Can a Trustee Locate and Access Cryptocurrency?
When Bitcoin first became popular, many bankruptcy trustees had little knowledge of it. Information was nearly impossible to access. However, times have changed. Coinbase, a global cryptocurrency exchange platform, provides detailed information about how the company assists bankruptcy trustees by freezing accounts, creating trustee accounts, and transferring assets. Judgment creditors can even receive virtual currency directly from Coinbase.
Are Cryptocurrency Assets Exempt in Bankruptcy?
As previously stated, cryptocurrency is considered an asset in bankruptcy. However, certain exemptions may apply to your cryptocurrency. There is a "wildcard" exemption available in California, which is currently capped at $1,550. It can, however, reach $30,825. If the debtor isn't using the wildcard exemption to protect other property, the exemption could apply to crypto holdings up to that limit.
How is Cryptocurrency Treated in Bankruptcy?
When you file for bankruptcy, you'll need to list all of your assets, including cryptocurrency. You'll also need to disclose any changes in your assets, such as if you've sold or exchanged cryptocurrency, within 30 days of the transaction. If you don't disclose your cryptocurrency or any changes to it, you could be accused of bankruptcy fraud.
How is Cryptocurrency Valued in Bankruptcy?
The value of cryptocurrency can be volatile. So, getting an accurate valuation of your cryptocurrency when you file for bankruptcy is important. You will need to list the value of your cryptocurrency as of the date you file your bankruptcy petition. The value should be based on the U.S. dollar equivalent when filing using a reliable exchange rate source, such as Coinbase or CoinMarketCap. If you have questions about how cryptocurrency will affect your bankruptcy filing, contact us to speak with one of our experienced California bankruptcy attorneys today. Some key takeaways include:
- Cryptocurrency is considered an asset in bankruptcy, and the trustee may sell it to pay creditors.
- Bankruptcy trustees can locate and access cryptocurrency.
- Cryptocurrency assets may be exempt in bankruptcy up to a certain amount.
- Cryptocurrency is valued in bankruptcy based on the U.S. dollar equivalent at the time of filing.
An Experienced Los Angeles Bankruptcy Attorney is Your Best Resource
If you are considering filing for bankruptcy and have questions about how your cryptocurrency will be affected, it is essential to speak with an experienced Los Angeles bankruptcy attorney. The attorneys at tRHM LAW LLP are experienced in handling complex bankruptcy cases and can help you understand your options. Contact us today to schedule a free consultation.
Get in touch with us today and schedule your free consultation.