Bankruptcy is usually associated with images of running out of money and having all your belongings seized by creditors. It is usually pictured as a tragic financial state that nobody wants to be in. While true, there is nothing more nerve-wracking than learning that you need to sell your properties to make money to get by, there is usually a whole process involved behind all this.
There is an exempt property in bankruptcy and nonexempt property in bankruptcy. The terms are pretty simple and self-explanatory. Exempt property in bankruptcy are items that you can protect from liquidation while nonexempt property are those assets that your creditors can go after..
Facing bankruptcy doesn’t have to be complicated. Knowing the right terms and procedures can go a long way in helping you get your life back on track. Think of bankruptcy as a kind of fresh start, a means for you to begin anew. Making the right distinctions between what properties you can sell and what you can keep along with taking the right course of action can help ease your bankruptcy worries.
You don’t have to deal with bankruptcy complications alone. Reach out and consult with a St. Charles bankruptcy attorney to walk you through the entire process step-by-step. A competent bankruptcy lawyer can help explain any unclear terms and steer you towards the appropriate option in order to achieve the desired outcome.
Nonexempt Property in Bankruptcy
Before you start taking your next step in dealing with bankruptcy, it is important to first define what nonexempt property in bankruptcy is. Nonexempt property are the items that aren’t protected in bankruptcy. These items won’t appear on an exemption list. What happens to your property depends on the kind of bankruptcy you file for, be it chapter 7 or chapter 13.
It is advisable to consult with a bankruptcy lawyer whenever faced with such complications. An experienced bankruptcy lawyer can explain the situation in terms that you can easily understand.
Exempt Property in Bankruptcy
The exact opposite of nonexempt property, essentially, is exempt property. Exempt property pertains to objects that you get to keep. These items are protected from liquidation. Examples of items typically declared as exemptions are cars, professional tools, and clothing as these are items needed in day-to-day living. Exemptions also depend on the asset. Luxury items such as collections and expensive artworks along with jewellery and pets are considered exempt properties.
Of course, what happens to your declared and undeclared properties depends on the type of bankruptcy you file. Chapter 7 and 13 bankruptcies have varying rules for exempt property, which is why it is important to consult with bankruptcy experts to erase any vague notions.
Nonexempt Property in Chapter 7 Bankruptcies
Chapter 7 bankruptcy is the easiest to file since it is quick and requires no debt to pay back. As a result, most people file for this type of bankruptcy. One is eligible for chapter 7 bankruptcy if their gross income is lower than the state’s median income and the individual does not have a bankruptcy discharge in the last six to eight years. The whole process of filing for chapter 7 bankruptcy takes roughly four to six months.
In chapter 7 bankruptcy, there is a term known as “automatic stay” which abruptly stops creditors from taking what you owe them, including items like wages, houses, and bank accounts to name a few. Creditors aren’t also allowed to cut off your utility services.
Nonexempt property in chapter 7 bankruptcy will be sold by the trustee in order to earn money that should help you pay for living expenses. When paying for expenses, priority debts such as taxes and child support are what come first. In the absence of priority debts, the trustee pays off nonpriority unsecured debts, personal loans, and utility bills.
Nonexempt Property in Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a more exclusive kind of bankruptcy that not just anyone can file for. Chapter 13 bankruptcy has certain eligibilities such as a particular debt limit for both secured and unsecured debts. Should your debt be too high, a chapter 11 bankruptcy would be recommended for you instead. Chapter 13 bankruptcy is recommended for those with a steady and high income, enough to prove to the courts your ability to pay for household obligations and a repayment plan. Chapter 13 is a type of bankruptcy is not eligible for businesses.
Nonexempt property in this bankruptcy type means that the trustee won’t sell your properties, rather you would have to pay an amount of equal value to unsecured creditors. Nonexempt property in bankruptcy has been known to help increase chapter 13 plan payment. You get to keep your nonexempt property but you get to pay a higher amount to unsecured creditors via the repayment plan.
Should the concept of nonexempt property, repayment plan, and all these financial burdens be too much for you, it is always advisable to consult with a bankruptcy attorney to help you with the next best step.
How to Handle Nonexempt Property in Bankruptcy
It can be quite confusing at first to determine rightfully which properties are exempted and which ones aren’t. If you ever asked if you can keep a nonexempt property in bankruptcy, it depends on the situation. Usually, if the trustee abandons the property, the debtor now has the power to sell these items, the money earned from which can be used to pay creditors. Situations wherein the trustee is likely to abandon the property include:
- Upside down property. Upside-down properties are items whose cost is higher than their market value.
- Items without significant nonexempt equity. Items without a significant nonexempt equity would leave nothing to creditors, which is enough reason for trustees to abandon it.
Nonexempt property can also be kept when the debtor offers to repurchase by paying the nonexempt value. In chapter 7 bankruptcy, debtors can offer to exchange an exempt property for a nonexempt property. This process depends on labor cost and asset value.
Whenever seeking the right option in paying off creditors, it is best to seek legal advice from an experienced bankruptcy lawyer to ensure that you are on the right track and are making decisions based on what benefits you most.
Seek Legal Help
Navigating the world of bankruptcy and other financial situations can be quite challenging. Enlist the help of an experienced St. Charles, Missouri bankruptcy lawyer to address your concerns. Contact Westbrook Law Group at 636-245-0469 to straighten out any concerns with finances ranging from bankruptcy to debts to bills. You don’t have to face your burdens alone. Schedule an appointment with Westbrook Law Group’s bankruptcy attorney today and get back on track.