What Are Non-Exempt Assets in Chapter 7 Bankruptcy?

Posted by Wesley Scott on December 9, 2020 at 10:15 AM
Wesley Scott

A hand holding keys in focus in the foreground, with a black car blurred in the background, asking the question, What are non-exempt assets in Chapter 7 Bankruptcy?When you file a Chapter 7 Bankruptcy with the bankruptcy court, you are invoking the power of the court to put into place an immediate court order restricting your creditors from collecting from you on most pre-petition debts. It is an awesome power debtors have. The focus in a Chapter 7 Bankruptcy is primarily on debtor’s assets. Debtor(s) are required to fully disclose all their assets wherever located in the world. The purpose of this is to show a Chapter 7 trustee, and creditors, what debtor owns for assets and are those assets exempt or non-exempt?

Just from a social policy standpoint, would it make sense to take every asset a debtor owns and liquidate those assets to pay creditors? It certainly does not. If you take debtor’s roof over their heads, their means to get to and from work, their clothing, and furnishings, you will leave debtor desolate and in need of county assistance. The county cannot afford your assistance, and therefore, will pass those costs onto the state who also does not want to pay for them.

This is why Congress and many states have passed a set of bankruptcy exemption laws allowing debtors to keep certain assets. Most Chapter 7 debtor’s assets are entirely exempt or protected from creditors. Clothing, furnishings, house, vehicle, pension, etc., in most cases are entirely protected or exempt.

     In some cases, debtors will have non-exempt assets. Maybe debtor has a home in Minnesota and a condo in Florida. The condo in Florida may not be exempt. If so, trustee takes the condo and sells it on the open market, and uses those proceeds to pay down debtor’s debts. Whatever debts that are left unpaid after processing all non-exempt assets, are discharged, tax free, forever.

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When the time is right, or when you are ready to get your life back, reach out to Minnesota’s LARGEST bankruptcy law firm by going now to www.kainscott.com. You will be so glad you did!

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