If you find yourself drowning in debt with limited means to pay what you owe, you may find yourself thinking about filing for Chapter 7 bankruptcy protection. This liquidation type of bankruptcy may allow you to wipe your financial slate almost completely clean.
A lot of people worry, however, that they’ll lose their home, car or other assets in bankruptcy. The truth is that most people who file Chapter 7 don’t lose anything due to exemptions in the law. Understanding the difference between exempt and non-exempt property may ease your concerns.
What are non-exempt assets?
The court refers to any instance in which a debtor doesn’t have any non-exempt assets as a no-asset case. Your creditors wouldn’t receive any money in that instance.
Non-exempt assets are any items that you own that the bankruptcy court could sell off to repay your creditors. State and federal law differ as to what each level of government perceives as exempt versus non-exempt assets. There’s no one way that states view the concepts either. Most all of the following assets would fall into the non-exempt category no matter the jurisdiction:
- A property other than your primary residence (like a vacation home)
- Investments like stocks and bonds
- A vehicle other than your primary mode of transportation (second cars, boats, etc.)
- Valuable collections, like art, coins or stamps
Some jurisdictions allow you to choose whether to follow either state or federal guidelines when determining what constitutes non-exempt assets. This can often allow you to make use of exemptions that protect even some of the things listed above.
What can you do if you’re worried that you have assets to lose in bankruptcy?
It’s important that you know that attempting to hide assets before filing for bankruptcy is illegal. However, you may be worried over nothing. Plus, if you do have non-exempt assets you wish to protect, Chapter 13 protection might still be an option. In most cases, debtors who go that route can protect everything.
Don’t let your fears cause you to lose your ability to seek debt relief. A bankruptcy attorney can help you better understand your choices.