If you’ve done any research about Chapter 7 bankruptcy, you may have read about how the bankruptcy trustee gathers the debtor’s non-exempt assets, liquidates them, and uses the proceeds to pay off creditors. “Non-exempt assets” refer to those assets that are not protected under bankruptcy laws; they can be liquidated or sold to repay the filer’s debts. Examples of non-exempt assets may include a vacation home, a boat, or extra real estate holdings.
Under the Bankruptcy Code, Chapter 7 filers are able to keep certain “exempt property,” but as we mentioned above, certain non-exempt or unprotected property can be liquidated by the trustee. If you’re thinking about filing Chapter 7 and you have some valuable assets, you should discuss what property you could lose with a bankruptcy attorney before deciding on Chapter 7 over another Chapter.
What Property Can You Keep?
In Chapter 7 bankruptcy, the property is classified as “exempt” or “non-exempt.” If you file Chapter 7 bankruptcy, you can keep all property that is exempt (protected) from your creditors. In Pennsylvania, you have the option of choosing between the state and federal exemptions.
The federal exemptions, for example, let a debtor keep equity in their home (up to a certain value), equity in their car (up to a certain value), household goods up to a certain dollar value, up to a certain value of jewelry, and they let the debtor keep their right to Social Security, unemployment, and veterans’ benefits, as well as public assistance and pensions, regardless of how much they are.
Chapter 7 bankruptcy can wipe out a lot of different kinds of debts, however, it can’t erase them all. The types of debts that cannot be discharged in Chapter 7 include:
- Child support
- Spousal support
- Property settlements
- Criminal restitution
- Certain taxes (usually recent0
- Debts not listed on the bankruptcy petition
- Debts that resulted from your willful or malicious harm
- Most student loans
- Personal injury awards for victims
To get your questions answered about exempt and non-exempt assets in a bankruptcy case, contact Dethlefs, Pykosh & Murphy Law.