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What is the marathon rule?

Published in Bankruptcy Law 2 mins read

The marathon rule refers to a specific rule in US bankruptcy law that allows debtors to keep certain assets, including their primary residence and a vehicle, even if they file for bankruptcy.

Here’s a breakdown of the marathon rule:

  • The rule applies to Chapter 7 bankruptcy cases. This type of bankruptcy allows debtors to liquidate their assets to pay off their debts.
  • It protects certain assets from being sold. This protection is based on the debtor's "need" for these assets.
  • The rule is designed to help debtors rebuild their lives. By keeping their home and transportation, they can maintain a stable living situation and find new employment.

How the Marathon Rule Works

The marathon rule is based on the "fresh start" principle of bankruptcy law. This principle aims to give debtors a chance to start over financially by protecting their basic needs.

Here's how the rule works in practice:

  • The debtor must meet certain requirements. These requirements vary depending on the state and the type of bankruptcy being filed.
  • The debtor must prove that they need the protected assets. This is done through documentation and testimony.
  • The bankruptcy court will determine whether the debtor qualifies for protection. If they do, the assets will be exempt from liquidation.

Examples of Protected Assets under the Marathon Rule

  • Primary residence: This is the home where the debtor lives with their family.
  • Vehicle: This is the car, truck, or other vehicle that the debtor uses for transportation to work, school, or other necessary activities.
  • Personal property: This includes items like furniture, clothing, and appliances that are essential for daily living.

Important Considerations

  • The marathon rule is not absolute. There are limits on the value of the protected assets.
  • The debtor may still have to pay some debt. The amount of debt that can be discharged in bankruptcy is limited.
  • The marathon rule is a complex legal concept. It's important to consult with an experienced bankruptcy attorney to understand how it applies to your specific situation.

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