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What Is Non-exempt Property in Bankruptcy?
Whether you’re having difficulty paying off credit card debt, medical bills, or expenses that just can’t be settled, bankruptcy may be the answer. But there is a catch.
If your income is high enough that you have to pay over $166 a month in payments under a Chapter 13 plan, any non-exempt property may be used to pay toward your debts. Check out this blog to learn what types of property are exempt from creditors and which ones aren’t.
Exempt Versus Non-Exempt Asset
Bankruptcy is a sort of legal action in which an individual or organization may work out a payment plan with creditors. This procedure gives debtors a financial new start while also assisting creditors in establishing their rights to specific claims. Creditors are generally prohibited from collecting on debts after a bankruptcy petition has been filed.
They are required to stop all collection attempts until the bankruptcy procedure is complete. This is characterized as an automatic stay. A partial automatic stay is triggered as a result of the fact that debt payment arrangements are often reevaluated and restructured throughout the bankruptcy procedure.
Exempt property is any asset that creditors cannot seize to fulfil the borrower’s obligations. Non-exempt property is any other property that creditors may take. It is essential to remember that exempt and non-exempt property varies by state.
Here’s what you need to consider about property classification and when to retain the services of a Towson bankruptcy attorney.
Non-exempt property is an asset that the bankruptcy court has the authority to liquidate or sell to settle all or part of your obligations. Creditors may also secure non-exempt property via the use of liens. Typically, this contains items that are not necessary, such as:
- Shares and government obligations
- Automobiles for recreation
- Vehicles number two
- Antiques and family heirlooms
- Added dwellings
- Amounts in excess of the limit
- Beyond a specific price point, jewellery
- Property that is not used as the main residence.
Exempt property is a property that the bankruptcy court cannot liquidate or sell to settle all or part of your obligations, as well as property that creditors cannot lien. Generally, this refers to property that is required for daily living, such as:
- Decorative Items
- Jewellery that is less than a specific price
- Unemployment insurance and social security
- Unpaid wages are a fraction of the total.
In Bankruptcy, What Happens to Non-exempt Assets?
Non-exempt property is liquidated — or sold — by the bankruptcy trustee to the highest bidder. The sale profits are then utilized to satisfy unsecured creditors who have a claim against your bankruptcy estate.
A trustee may let you “buy” the property’s non-exempt equity in rare instances. In this situation, the amount you must pay to retain your property is determined by the asset’s worthless exemption amount.
Therefore, if the value of your property is $10,000 and the exemption is $8,000, you may repurchase your non-exempt equity for $2,000. The trustee may let you do so to avoid the costs associated with selling the property. You will get $8,000 if the trustee sells the property. The remainder of your assets is used to pay out some of your unsecured obligations, such as credit cards and medical expenses.
Non-exempt Assets and Bankruptcy under Chapter 13
As long as unsecured creditors get the value of the non-exempt property under the Chapter 13 repayment plan, the filer retains all non-exempt property.
Do Individuals Generally Lose Property in a Chapter 7 Bankruptcy?
Certainly not. In the United States, most Chapter 7 cases are non-asset matters. This implies the filer may get debt relief without surrendering any property. In certain situations, a filer may opt to file Chapter 7 bankruptcy to get much-needed financial relief, notwithstanding the possibility of losing some property.
After all, declaring bankruptcy and paying off tens of thousands of dollars in debt is a much better investment than preserving a $2,000 piece of real estate that hasn’t appreciated in value in a decade.
If you’re concerned about your state’s exemptions or the protection of specific categories of property, consider checking with a bankruptcy attorney. Given that the majority of legal firms provide no-cost consultations for Chapter 7 bankruptcy cases, the most you stand to lose is an hour of your time.
What If a Creditor Wants to Take My Exempt Assets?
A creditor may try to seize a debtor’s exempt property. This usually leads to the non-exempt property being classified. In such circumstances, the debtor must show exemption. They must also show that the creditor has no genuine claim.
When Filing for Bankruptcy in Maryland, How to List Your Assets
When filing bankruptcy in Maryland under Chapter 7 or Chapter 13, you must detail all your assets and classify them as exempt or non-exempt. You may be required to show paperwork or evidence of exemption for exempt assets, mainly if they are distinctive or non-standard, such as a principal residence or automobile. When you file for bankruptcy, you certify that the information you provide is true and correct to the best of your knowledge.
Contact a Towson Bankruptcy Lawyer for Assistance with Non-Exempt Property
Once again, if an exemption is not submitted and claimed correctly, a creditor may seize the property. Along with filing exemptions, an expert and local bankruptcy attorney can assist you in determining the best chapter of bankruptcy for you.
So, suppose you or your business have found yourself in a financial situation where you may need to file for bankruptcy. In that case, you need to contact a bankruptcy lawyer to assist you with the requirements of what property is exempt and what assets are non-exempt. If you file bankruptcy without understanding this, it will cost you more later down the road when the trustee figures it out.
These requirements are state-specific, and you must contact an experienced bankruptcy attorney to ensure that your assets are protected correctly. Additionally, the attorney will be able to assist you with filing for bankruptcy, completing the relevant documents, and representing you at any necessary hearings and 341 meetings. Call us today to schedule a consultation with us.