Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
Cryptocurrency can make a bankruptcy filing a little more complicated. Bitcoin, Ethereum, and other digital assets are generally treated as property, so you need to disclose what you own when you file.
Where the crypto is held, how much it is worth, and whether an exemption applies can all affect what happens to it. A Milwaukee bankruptcy attorney can review those issues with you before you file.
This guide explains what to disclose, how crypto is valued, and what can happen to it during bankruptcy.
Yes. A bankruptcy filing must show your assets and debts. Under 11 U.S.C. § 521, a debtor must usually file a schedule of assets and liabilities. Section 541 also brings many forms of property owned at the start of a case into the bankruptcy estate.
This can include:
“A schedule of assets and liabilities” is part of the information a debtor must usually file.
If you miss an asset by mistake, tell your attorney as soon as you can. Hiding property on purpose is much more serious. It can put your discharge at risk and may lead to other legal problems.
Crypto does not have a fixed price. Its value can change from one hour to the next, which makes the timing of the valuation important in a bankruptcy case.
You generally need to report the fair market value of your holdings when you file. Keep the records that show how you reached that figure, such as an exchange statement, wallet balance, transaction history, or pricing information from the platform you used.
The trustee may ask questions if the reported value is unclear or doesn’t match the records. Transfers made shortly before filing may also be scrutinized.
Keep the supporting records with your bankruptcy paperwork. If there is a question about the value later, you will have something to show how you calculated the number.
The chapter you file under can change what happens to your cryptocurrency.
In Chapter 7, the trustee looks at the property you own and determines what is protected by an exemption. Nonexempt property can be sold, with the proceeds going toward your creditors.
So owning crypto does not automatically mean you have to give it up. If an exemption covers it, you may be able to keep it. If it does not, the trustee may take steps to sell it.
Chapter 13 is different because you generally keep your property while making payments through a repayment plan. You still have to disclose your cryptocurrency, and its value can affect the amount you must pay to creditors.
Your income, debts, assets, and available exemptions all factor into how the case is handled. The Wisconsin bankruptcy process can therefore look different from one filer to another.
Wisconsin does not have a stand-alone exemption named for crypto. Eligible Wisconsin filers may use either Wisconsin exemptions or federal bankruptcy exemptions. In general, the filer picks one system rather than mixing parts of both.
Whether an exemption can protect crypto depends on its value, the rules that apply, your other property, and the system used.
This should be checked before filing. The choice of exemptions can affect what property you may keep.
|
Asset |
Must Be Listed? | How Value Is Shown |
Main Issue |
| Bank account | Yes | Account balance | Often easy to document |
| Real estate | Yes | Market value and equity | Liens and exemptions |
| Cryptocurrency | Yes | Supported market value | Price changes, wallets, records, exemptions |
Crypto is not outside bankruptcy law because it is digital. The main issues are its value, where it is stored, and how ownership can be shown.
A trustee may need to know where your crypto is held and how it moved before you filed.
Keep records such as:
Do not sell, give away, move, or hide crypto to keep it out of the bankruptcy case. Transfers made before filing may need to be disclosed.
Keep private keys and seed phrases secure. If you need to prove ownership or access, ask your attorney how to provide that information safely.
For federal tax purposes, the Internal Revenue Service treats digital assets as property, not currency. Selling or trading crypto can lead to a taxable gain or loss. Crypto received as income may also have to be reported.
“Digital assets are considered property, not currency” for U.S. tax purposes.
Bankruptcy can add more tax rules. For an individual in Chapter 7 or Chapter 11, the bankruptcy estate may be a separate taxable entity. Chapter 13 is treated differently.
The tax result can depend on the chapter and the type of crypto deal involved.
Yes, in most cases. Crypto is property, just like other assets you own, and needs to be included in your bankruptcy schedules.
That is possible. Whether you keep it will depend on the exemption rules, the amount of crypto you own, and the type of bankruptcy you file.
A trustee can sell cryptocurrency that is part of the bankruptcy estate and is not protected by an exemption. The proceeds may then be used to pay creditors.
Let your bankruptcy attorney know as soon as you realize the mistake. You may be able to amend your schedules. Leaving an asset undisclosed on purpose is much more serious.
No. Wisconsin does not set aside a separate exemption for crypto. An available state or federal exemption may still protect some of its value.
Possibly. Selling or exchanging crypto can have tax consequences, and bankruptcy may affect how those transactions are reported. The IRS generally treats cryptocurrency as property.
Owning cryptocurrency does not stop you from filing bankruptcy. It does mean you need to disclose what you own, keep accurate records, and determine which exemptions may protect those assets.
A Wisconsin bankruptcy attorney can review your cryptocurrency holdings and help you understand how they fit into your bankruptcy case.
Debt Advisors Law Offices helps Wisconsin residents understand how property, exemptions, Chapter 7, and Chapter 13 may apply to their situation.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
