A chapter 7 bankruptcy is referred to as a liquidation bankruptcy. This is because any assets above what the bankruptcy exemptions cover will have to be liquidated or you will have to pay their value to keep them. Non-exempt assets can happen in both Minnesota and Federal exemption cases. That being said, they are more common in Minnesota exemption cases. Let’s look at a few examples:
Example 1-Liquidation:
Your case was filed using Minnesota exemptions. You own a boat free and clear worth $5,000. In Minnesota, there is no exemption to protect assets like boats. The $5,000 your boat is worth would therefore be property the trustee would either want to liquidate or you can chose to pay and keep it. If you chose to have the boat liquidated the trustee would have an auctioneer auction off the non-exempt property, in this case a boat, and any proceeds received would go to pay the auctioneer’s fees, the trustee, and the rest would be distributed to your creditors.
Example 2-Paying the Value:
Your case was filed using Federal exemptions. You own a boat free and clear worth $20,000. The max federal wildcard exemption is $15,425. Let’s say you can apply this completely toward your boat, so that leaves $4,575 non-exempt. If you chose to pay to keep this, you will have to pay $4,575 to the bankruptcy estate. Typically, bankruptcy trustees will work out a payment plan- but you should speak with your attorney about your specific case.
Every case is different and your specific case may not have non-exempt assets. It is important to speak with a bankruptcy attorney about your situation.
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For any questions you have regarding chapter 7 and liquidation or anything else bankruptcy related, visit www.lifebacklaw.com to speak with an attorney today. You will be glad you did!
