When you file for Chapter 7 bankruptcy, you are likely deep in debt and are drowning in unpaid bills. To resolve your financial situation, the Chapter 7 bankruptcy proceedings will discharge most of your debt and may liquidate some of your property to put towards the repayment to your creditors. This can cause great fear – and might even discourage you from filing for Chapter 7 bankruptcy. Liquidating all of your property – like your car, and equipment you need for work – can leave you debtless but also unable to perform your daily job functions after the bankruptcy is final. While being out of debt would be nice, you don’t want to lose all of your belongings.
To avoid this, you can protect some of your property through exemptions.
What Are Exemptions?
The goal of bankruptcy is to help you get back on your feet. Because of this, the court doesn’t want to leave you without the necessities to start your life over or perform your job functions. This would be counterintuitive and would leave you in a bad place financially after bankruptcy, preventing you from successfully starting over.
Under bankruptcy laws, you are allowed to keep a certain amount of property after your proceedings by marking it “exempt.” This means the court-appointed bankruptcy trustee cannot sell the protected property to pay off your creditors.
If the property is not allowed to be protected from your bankruptcy estate, then it is labeled as “non-exempt” and can be sold off.
Typically, you can exempt a certain amount of property during bankruptcy. When working with your bankruptcy attorney to determine what can be labeled exempt versus non-exempt, you can use your lawyer’s expertise to try to keep most of your property.
Common Non-Exempt Property
Non-exempt property usually consists of items that are not necessary to live or work. Some common items that the court will usually label as non-exempt and you will need to turn over include:
- Expensive sports equipment.
- Expensive musical instruments.
- Valuable collections. This can include expensive jewelry, antiques, stamps, coins, baseball cards, and other items.
- Family heirlooms. While there is a sentimental attachment to these, they are not deemed necessities.
- Financial accounts and assets, including checking accounts, savings accounts, stocks, and bonds.
- A second vehicle or home. These can be considered extravagances that will need to be included in your bankruptcy estate.
Common Exempt Property
Items that can be labeled “exempt” are usually necessary items you need to live or work. Some common items that the court will typically let you protect from liquidation are:
- A vehicle, up to a certain value.
- Necessary clothing. This may exclude some of your clothes, especially if you have some designer items.
- Necessary household furniture. You might not be able to keep all of your décor items but should be able to protect basic furniture and goods.
- Appliances. You will not need to disconnect and sell off all of your appliances, especially if they are necessary to keep your house running.
- Tools or equipment needed to perform your job.
- A portion of the equity in your home.
- Your pension plan and any public benefits you receive (such as welfare, social security, or unemployment).
- Any damages you were awarded in a personal injury case.
Contact a Chapter 7 Bankruptcy Attorney
If you are considering filing Chapter 7 bankruptcy to cope with mounting debt, it’s crucial to hire an experienced attorney to help you through the process and protect both yourself and your property. Our experts can help you determine how to protect your assets and correctly navigate the Chapter 7 bankruptcy proceedings. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.