When faced with bankruptcy, we usually think of selling our possessions or having creditors seize them. Many fear this very notion since it always gives them thoughts of losing everything and I mean everything they worked so hard for. Of course, this won’t happen instantaneously. Creditors won’t just magically show up at your door and grab a hold of everything in your home. There is always a procedure and that is what this blog covers.
There is exempt property and nonexempt property in bankruptcy. The difference is pretty stark and self-explanatory. Nonexempt property in bankruptcy are items that creditors will sell in order to generate a profit, the said profit will be used in order to pay living expenses. Exempt properties are assets, usually valuable ones that you will need to continue living and working. In short, you get to keep these items since you need them in your day-to-day life to help you get back on your feet. As such, creditors cannot go after these.
Bankruptcy doesn’t always mean losing it all. While it surely is a financial problem, it isn’t always gloom and doom. Through better, more positive lens, we can view bankruptcy as a fresh start, an opportunity to begin on a clean slate. Making the distinction between exempt and nonexempt property in bankruptcy can help you face your bankruptcy issues better.
If you’re going through bankruptcy and other financial issues, enlist the help of a Portland, Oregon bankruptcy attorney. The lawyer can walk you through the process and help you make better decisions for a better future.
Exempt Property vs. Nonexempt Property in Bankruptcy
When people file for bankruptcy, there are items that they can sell for a profit and there are items that they protect from creditors. This kind of procedure is the reason why the U.S. Bankruptcy Court and the Bankruptcy Code were established. In the event of a bankruptcy, a person has a sizable amount of property that they can turn over to the bankruptcy estate, where a bankruptcy trustee handles these properties. It is the trustee’s responsibility to sell these off, the amassed income paid to the filer’s creditors.
When items are exempted in a bankruptcy case, the law will enable individuals to keep some of their property. This property is known as exempt property. Exempt property, as explained above, are necessities the individual needs for living and working such as cars and professional tools. The reason why these are considered exempted is because the debtor needs to generate income to get out of debt and one of the ways to accomplish that is by working. Seizing these items is counterproductive to the said goal.
Nonexempt property in bankruptcy include musical instruments, family heirlooms, collections, investments, and second vehicles or homes. Anything that is used for hobbies or leisure that the debtor can afford to give up without directly affecting their ways of living or professional lives.
Filing for bankruptcy is no easy task and giving up certain properties can be quite daunting at first. This is why it is important to seek counsel from a seasoned bankruptcy attorney who can guide you through the process and explain complicated terms to help you get your life back on track.
Nonexempt Property in Chapter 7 Bankruptcies
What happens to your properties depends on the type of bankruptcy you file for. Most individuals file for chapter 7 bankruptcy since the qualifications are quite attainable. Simply put, you needn’t pay back any debt. An individual can also qualify for chapter 7 bankruptcy if their income is lower than the state’s median income.
Chapter 7 bankruptcy takes quite some time to process, roughly four to six months.This kind of bankruptcy also has a concept known as automatic stay. Automatic stay stops creditors from collecting on your debts. Creditors cannot seize your wages, cars, homes, and accounts.
Similarly, nonexempt property in bankruptcy of this kind will mean that your bankruptcy trustee will sell properties that aren’t declared as exempt in order to generate income to pay off debts and living expenses. Any priority debts you have such as child support will usually be the first ones to be paid off.
Nonexempt Property in Chapter 13 Bankruptcy
If you have a higher, more consistent income but aren’t a business, chapter 13 bankruptcy is what you should file. Chapter 13 bankruptcy eligibility involves an individual with debt not going above the designated limit, for both secured and unsecured. The filer should also prove that they have enough money for the repayment plan.
For nonexempt property in this bankruptcy, the bankruptcy trustee won’t sell your items, rather the filer is expected to give the nonexempt property’s equal amount to unsecured creditors.
If the terms and conditions are quite complicated to understand, it is best to enlist the help of a legal professional well-versed in the area of bankruptcy law. The bankruptcy attorney can help you with any situations involving your property that you may be having trouble dealing with to ensure a smoother transaction.
Can I Keep Nonexempt Property in Bankruptcy?
In Chapter 7 bankruptcy, the trustee takes care of the properties and sells them off to pay the creditors. Nonexempt property, as explained above, usually involves items that are for leisure such as vacation houses and hobby equipment. These aren’t exempted, but there are instances where one can keep nonexempt property in bankruptcy.
One can retain their properties if the trustee abandons it, if you buy it again from the trustee, or you swap it for another property in agreement to the trustee’s conditions.
When Does a Trustee Abandon Property?
A trustee has their conditions for abandoning nonexempt property in bankruptcy. Among them are upside-down property or if the loan secured by the property is higher than the market value and the cost and sale of the trustee’s commission. In this scenario, if the items aren’t worth much or would leave the trustee with little to nothing at all, you are encouraged to keep it as the trustee would see it best to abandon this property.
Seek Legal Counsel
Navigating the ins and outs of bankruptcy can be quite complicated. If you are dealing with this kind of issue, contact Northwest Debt Relief Firm at (503) 487-8973. The firm’s attorneys can help you figure out the next best step when dealing with bankruptcy. Bankruptcy is a chance for a fresh, new start and dealing with it with seasoned professionals by your side can help you come out on top. Schedule an appointment with Northwest Debt Relief Firm right now.