Exempt vs. Non-exempt Property Under Chapter 7
Debtors, whether they are businesses or individuals, are often justifiably concerned about what property they will be allowed to keep and what they must give up. An experienced bankruptcy lawyer can answer these and other questions, allay fears and keep the process moving forward as painlessly as possible. In a Chapter 7 liquidation case, the debtor must relinquish certain property to the bankruptcy trustee so that he or she can sell the property and use the proceeds to pay off debts. Property of the bankruptcy estate is broadly defined in the Bankruptcy Code. 11 U.S.C. § 541. The bankruptcy estate is technically the legal owner of all of the debtor’s property and consists of all legal and equitable interests that the debtor has in property at the initiation of the bankruptcy case. Income that the debtor earns after the date of the petition is not included in the bankruptcy estate.
Items that the debtor usually must forfeit include:
- Cash, bank accounts, stocks, bonds and other investments over certain amounts
- A second home or vacation home
A debtor must file a schedule of exempt property with the court. Exempt property is property that the debtor can protect from liquidation. The Bankruptcy Code allows each state to adopt its own exemption laws, which the debtor can select instead of the federal exemptions. It is important to consult with an attorney who can explain the exemptions available under your state’s laws and how they compare to the available federal exemptions.
- Chapter 7 Bankruptcy – An Overview
- Bankruptcy Abuse Prevention and Consumer Protection Act
- Discharge Under Chapter 7
- Exempt vs. Non-exempt Property Under Chapter 7
- Alternatives to Chapter 7 Bankruptcy
- Frequently Asked Questions About Chapter 7 Bankruptcy
- Chapter 7 Resource Links
Exempt property typically includes:
- Motor vehicles, up to a certain value
- Reasonably necessary clothing
- Reasonably necessary household goods and furnishings
- Household appliances
- Jewelry, up to a certain value
- Pensions and Retirement Funds such as IRAs and 401Ks
- A portion of the equity in the debtor’s home
- Tools of the debtor’s trade or profession, up to a certain value
- A portion of unpaid but earned wages
- Public benefits — including public assistance (welfare), social security and unemployment compensation — accumulated in a bank account
- Damages awarded for personal injury
Speak to a bankruptcy lawyer
If you have questions about what property you will be allowed to retain if you file for bankruptcy under Chapter 7 of the Bankruptcy Code, it is prudent to seek the counsel of an experienced and knowledgeable bankruptcy attorney. Call today to schedule a consultation.
DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.