Texas residents like you want to know everything about bankruptcy before you file for it. Each option has different pros and cons. For example, many people believe that Chapter 7’s biggest con is having to liquidate your assets.
But do you have to get rid of everything you own? The answer is: no. You have exempt and non-exempt property, and it is important to know which is which.
What assets are exempt?
The Balance asks the question: what are your nonexempt assets? To understand that, you must understand how Chapter 7 bankruptcy affects your assets in general. When you file for Chapter 7 bankruptcy, the law expects you to turn over a large chunk of your property to a bankruptcy estate. A bankruptcy trustee manages this estate. They sell the property therein, raising money to pay off your creditors.
Thus, nonexempt assets are the assets that you must turn over to the bankruptcy estate. These are the things you must sell. By comparison, exempt property and assets are things you can keep. Some exempt assets include:
• Reasonably necessary clothing, household furnishings and goods
• Jewelry and motor vehicles up to a set value
• Household appliances
• A portion of home equity
• Tools of trade for your profession up to a set value
• Damages awarded to you for personal injury
• Public benefits (social security, welfare, etc)
• A portion of earned but still unpaid wages
What assets are non-exempt?
Non-exempt property often includes:
• Family heirlooms
• Expensive musical instruments, unless that is your profession
• Expensive collections (stamps, coins, etc.)
• Second vehicles or vacation homes
• Cash, stocks, bonds, bank accounts and other investments
You do not have to give up everything, but there is still a large amount that you will need to part with. This is why you should carefully consider your options before making your choice.