Can I Keep Any Assets?
Most people want to know if they may maintain their property while considering Chapter 7 or Chapter 13 bankruptcy. The short response is perhaps. There is a catch to Chapter 7 bankruptcy: if you own too much property, the bankruptcy trustee may sell some of it and distribute the proceeds to your creditors.
What kind of property may you keep, then? Exemptions—state rules that outline what you are permitted to protect in Chapter 7 and Chapter 13 bankruptcy—determine the answer.
What Are Bankruptcy Exemptions?
Exemptions allow you to protect a specific amount of assets during bankruptcy, including a cheap automobile, business equipment, clothing, and a retirement account. If an asset is exempt, you won’t have to worry about it being taken or sold for the benefit of your creditors by the bankruptcy trustee assigned to your case.
Many exclusions cover particular types of property, such as a car or furniture, up to a certain dollar level. In some cases, an exemption safeguards the entire asset’s worth.
What Assets Are Non-Exempt?
Anything that isn’t protected by bankruptcy law is regarded as non-exempt, and, in Chapter 7, the trustee may sell it to recoup the debt. How much the debtor in a Chapter 13 bankruptcy will have to pay creditors whose debt is not secured by collateral is based on the value of the non-exempt property.
Non-exempt assets can include:
● Secondary residential property such as a vacation house
● A second car
● Investments (not including retirement accounts)
● Recreational vehicles like boats or motorcycles
● Musical Instruments
● Fur coats
● Extra televisions
● Coin collections
● Family heirlooms
There are numerous ways for a filer to prevent a non-exempt asset from being liquidated under Chapter 7 bankruptcy regulations. You can try to persuade the trustee to take an item of exempt property in its place if it’s important to you, or you can offer to repurchase the item from the trustee.
The trustee may determine that a piece of non-exempt property is too difficult to sell or isn’t valuable enough to warrant selling it to benefit the creditors. In that situation, the trustee will formally return the item to you by filing a Notice of Abandonment.