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Understanding the difference between exempt and non-exempt assets

Like others in Washington, D.C. who are struggling with debt, you may have considered filing for chapter 7 bankruptcy. When making the decision whether or not to file, you may take into account the liquidation requirements. At Ammerman & Goldberg “Bankruptcy” Law Office, we know that it can be confusing to understand what assets are subject to liquidation in such cases. Thus, in this post, we will discuss exempt versus non-exempt assets.

When you seek debt relief through chapter 7 bankruptcy, some of your assets and property will be sold off by a bankruptcy trustee who is assigned to your case. Under the federal bankruptcy code, however, you may be able to retain some of your property and protect it from liquidation, according to the U.S. Courts. These assets are known as exempt property because they are not subject to liquidation.

There are a number of assets that are considered exempt during your chapter 7 bankruptcy case. This may include clothing that is reasonably necessary, household appliances, household furnishings and goods that are deemed reasonably necessary, and your primary motor vehicle. You may also be entitled to keep some tools relating to your profession or trade. Additionally, the homestead exemption safeguards the equity you have in your home, up to $125,000.

In general, luxury and other items that are not considered necessary for living and working may be considered non-exempt. These assets may include the following:

  • Stamp, coin and other valuable collections
  • Second vehicles
  • Vacation or second homes
  • Family heirlooms
  • Costly musical instruments

Additionally, some bank accounts, bonds, cash, stocks and other investments may not be exempt from liquidation in your chapter 7 bankruptcy case.

For more information about exempt and non-exempt assets, please visit our Property You Can Keep page.

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