A person who files for Chapter 7 bankruptcy will have to turn some assets over to the court, so they can be liquidated to pay off as much of the debt as possible. There are two classifications of assets that are used for bankruptcy – exempt and nonexempt. An exempt asset, such as your primary home and vehicle may qualify as exempt assets if they meet the strict equity and value limits. These are the ones that aren’t taken for the bankruptcy.
The nonexempt assets are the ones that the bankruptcy court will use to pay off your debts as much as possible. If you don’t have any nonexempt debts, the case is known as a “no asset bankruptcy” and the creditors won’t receive any payments.
Some nonexempt assets that you might have to turn over to the bankruptcy court include:
- Valuable artwork
- Jewelry that exceeds a specific value
- Rental homes or second homes
- Vehicles or homes with equity over a certain amount
- Expensive music instruments if they aren’t for your profession
- Coin, stamp or other collections with value
- Investments accounts that aren’t recognized retirement accounts
- Expensive clothing
While the categorization of exempt and nonexempt assets might play a role in your decision about whether to file for bankruptcy or not, you need to consider the ways it will benefit you. It can be hard to get rid of things, but the mental peace of being back in control of your finances might be well worth the loss of those material items. Discuss the status of items your concerned about with your attorney.