Chapter 7 Bankruptcy: Exempt and Nonexempt Properties
For those who need a fresh, debt-free start, declaring Chapter 7 Bankruptcy is your best bet. In a Chapter 7 Bankruptcy case, debtors relinquish their property to a bankruptcy trustee who liquidates it and uses the proceeds to pay off creditors. When declaring bankruptcy, many people are surprised to learn that they do not have to hand over all of their assets to the trustee. In fact, some property is completely exempt from the liquidation process. To give you a better idea of what assets you can keep, Groce & DeArmon discusses exempt and nonexempt properties.
Nonexempt Property in Chapter 7 Bankruptcy
In a Chapter 7 Bankruptcy case, nonexempt properties are assets that the debtor must turn over to the trustee. Generally, a nonexempt property is anything that is not necessary to living or working. When liquidated, nonexempt properties can pay off creditors and put debtors back on their feet. Nonexempt property can include the following:
- Cash, savings accounts, stocks, bonds, and other investments
- A second house
- A second vehicle
- Family heirlooms
- Collections of valuable items
- Expensive and unnecessary clothing, furniture, and jewelry
Exempt property is protected from liquidation. Although exemption laws differ in every state, the federal government exempts several pieces of property. Generally, anything that is considered a “necessity of modern life,” an item that is necessary for living or working, is exempt from liquidation. Exempt property can include the following:
- Necessary vehicles
- Necessary clothing
- Necessary household goods and furniture
- Household appliances
- Tools for the debtor’s trade or profession
- A portion of unpaid but earned wages
- Pension funds
Can I Keep Any Nonexempt Property?
Parting with some of your nonexempt items may be difficult, especially when they have sentimental value. Although you should liquidate any unnecessary piece of property to pay off your debts, you might be able to save a few nonexempt items. To save nonexempt assets, there are a couple different routes to take.
First, you can save nonexempt property by buying it back from the trustee. This is a good option if you want to keep a sentimental item, such as a family heirloom. Second, you can exchange some of your exempt property for some of your nonexempt property, which is a good option if you cannot afford to buy back your property. Lastly, you may not have to worry about buying or trading at all. If any of your property is not worth substantial value, the trustee may not even bother liquidating it. To ensure you have the best chance of saving your nonexempt property, contact a bankruptcy attorney.
Contact Groce & DeArmon
Chapter 7 Bankruptcy is a complex area of law, but consulting with a bankruptcy attorney ensures your rights are protected. Whether you have already declared Chapter 7 Bankruptcy or you are simply considering filing, it is never too late to seek legal aid. To speak with a bankruptcy attorney, contact Groce & DeArmon today!