How Gamers Can Protect Their Digital Assets in the Event of Bankruptcy

In life, situations arise when bankruptcy is inevitable. However, this procedure is not easy, and it has consequences. And if everything is more or less clear with physical property, what will happen to digital assets, which a gamer may have a lot? Let’s figure it out.

What Can They Take?

If you’ve already wondered, “Do I qualify for bankruptcy?” You know that in this procedure, the debtor’s property is taken away to pay off the debt. In the USA, this process is regulated by criminal law and the special code. Both documents state that the debtor is responsible for deceiving the creditor and, therefore, may lose all of his property. And if the deception is proven, he may suffer a more serious punishment—imprisonment.

In the United States, a bankrupt individual is recognized by a special court that deals with such cases. The fact of bankruptcy can be recognized and established in legal insolvency. After this, the borrower’s property is sold, and the debts are repaid with the proceeds.

Some assets are protected by state law. For example, these could be cars costing less than five thousand dollars. Accordingly, if a car costs, for example, $19,000, it will be confiscated, but if it costs $4,999, it will not be confiscated. In addition, in some states, a bankrupt can keep any valuables (the amount is determined by the state court). It protects the law and other assets, such as a house, wedding rings, and a car. If among the assets there are expensive ones, then the representative of the Executive Bureau will allow the rest to remain if the expensive ones are sold to reduce debt to creditors.

Deciding to file for bankruptcy may be a last resort. If there is a way to repay the debt, it is best. To do this, you can contact creditors and agree with them about repaying your debt. If there are any assets, they can be sold if this option is not more unprofitable than a loan.

Procedure Options

American legislation has identified six options for bankruptcy. Most often, only three of them are found.

These are the options provided by the US Bankruptcy Code in the following sections:

• Section 7 provides that the debtor is deprived of all rights to his property and can no longer enjoy it. Everything the bankrupt person owns is sold, and the money raised from the sale is used to pay off the debt owed to the creditor/creditors. The order of distribution of funds between creditors is established in accordance with federal law.

• Section No. 13. The bankrupt is not deprived of the right to use property and can carry out any operations with it – sell, rent, give, etc. This option applies to individuals with a stable income if the volume of funds received is insufficient to pay off all debt obligations. According to the instructions of the code, a certain amount is taken from the debtor to repay the debt, which is transferred to the creditors. How much money to send and to whom is decided following the requirements and instructions of federal law.
• Section No. 11. This chapter deals with the debt reorganization procedure for persons engaged in fishing, maintaining a family farm, etc. According to the requirements of the section, the debtor is not deprived of property. The person continues to work and can engage in any other type of activity. But he must submit a court-approved plan to the creditor/creditors. Next, all groups of creditors must approve the plan by vote. The document is considered approved when two-thirds of those present vote for it. Typically, such bankruptcy cases in the federal Enforcement Bureau are overseen by representatives of the United States Attorney General.

Digital Assets in Bankruptcy

On February 7, 2024, the United States Bankruptcy Court issued an order granting the debtor’s motion to assess claims based on digital assets, in which, in particular, it approved the digital asset conversion table attached to the order for use in assessing claims based on digital assets and fiat currency for the purposes of solicitation, voting, and distribution under any Chapter 11 plan. The Digital Asset Conversion Table provides a basis upon which creditors can understand the value of their claims. Creditors can calculate the value of digital asset claims for voting and distribution purposes.

The table is divided as follows:

• Fiat currency
• Stablecoins
• Other cryptocurrencies and tokens (except FTT)
• Non-marketable assets – CLOSED digital assets
• Non-marketable assets – CUSTOM tokens
• Non-marketable assets – options
• Claims regarding FTX and FTT issues
• Leveraged Tokens
• Tokenized shares
• Derivatives Spot+ (EU only)
• Futures

To calculate the value of your claim for each ticker, multiply the quantity of each ticker by the price in the digital asset conversion table for the ticker you claim. Add up the claim value for each ticker to get the total claim value.

Conclusion

Thus, digital assets are included in the debtor’s total property. Don’t try to hide them. This will lead to even more dire consequences. Instead, think carefully about your bankruptcy plan and choose the article that best suits your needs. Better yet, consult with an experienced specialist in bankruptcy law.