People generally pick one of two options when looking to relieve outrageous debt: Chapter 13 bankruptcy or Chapter 7 bankruptcy. Chapter 13 bankruptcy is a refinance plan that may negotiate how much debt someone needs to pay off. This is beneficial for people who have some disposable income but have difficulties paying off their debt.
The more commonly used bankruptcy, however, is Chapter 7. Chapter 7 bankruptcy is a liquidation plan. In other words, people filing for Chapter 7 bankruptcy may have to sell off some of their property to pay for their debt, and the remaining debt may be relieved.
While Chapter 7 bankruptcy sounds more efficient for some, it can also be worrying to hear they may lose their assets. People often fear that, if they liquidate their assets, then they’ll be left with nothing and end up living in a cardboard box. However, possibly to your relief, assets are considered either exempt or nonexempt.
The following may help you understand which of your assets are exempt or nonexempt:
Keeping your property after bankruptcy
Chapter 7 bankruptcy, as stated above, will liquidate nonexempt assets. Typically, nonexempt assets are anything that may exceed the necessities of modern life. For example, a second home or vehicle, an art collection or family heirloom, or stocks and bonds may all be considered nonexempt.
On the other hand, exempt assets are anything that allows someone to continue living and working. That could mean a home and vehicle, necessary clothing or tools of the trade (musical instruments, woodshop tools, etc.). Yet, some people may be able to exempt a certain amount of their assets during bankruptcy.
What this means is that people won’t lose everything when they file for bankruptcy. When filing for bankruptcy, there may be reasonable cause for a debtor to keep most of their assets.
Bankruptcy is unique for everyone. If you’re looking to file for bankruptcy and wipe away your debt, then you may need to know your legal options.