How Much in Assets Can You Keep in a Chapter 7 Bankruptcy?
A Chapter 7 bankruptcy is one of numerous types of bankruptcy you can file, and the most popular among consumer debtors. Also known as liquidation under the bankruptcy code, a Chapter 7 bankruptcy requires you to turn over valuable assets to the bankruptcy trustee. The court then sells the assets and distributes the proceeds to your creditors. Certain states allow you to protect some of your assets from liquidation.
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Exemptions
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An exemption under the bankruptcy code is a protection for certain categories of assets. For example, you may be allowed to keep up to $3,000 in the form of a vehicle in certain states. When you file a bankruptcy petition, if you properly list the correct law exempting your assets, they are not available for the benefit of your creditors. If no creditors object to your exemptions within 30 days of your meeting of creditors, they are final.
State Variations
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While bankruptcy is a federal procedure, only 15 states and Washington, D.C., allow you to use federal exemptions for your property. Some states, however, such as California provide you with more than one set of exemptions that you can choose from depending on what best protects your property. Some states are considered to be more generous in their exemptions than others. For example, Florida and Texas each offer an unlimited homestead exemption, meaning a home of any value is protected from liquidation in those states.
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Buyback
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In a Chapter 7 proceeding, the bankruptcy trustee is empowered to seize and liquidate any of your assets that are either improperly exempted or that exceed the allowable exemption level. Some trustees will, however, offer you the chance to buy your nonexempt property back rather than go through the expense and paperwork of actually attaching your assets. If the value of the nonexempt property is low, the trustee may not pursue the asset at all.
Chapter 13 Bankruptcy
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If you have assets of significant value, you may consider filing a Chapter 13 bankruptcy instead of a Chapter 7 bankruptcy. While you may have to liquidate some of your assets in a Chapter 7 proceeding, a Chapter 13 will protect all of your assets from court seizure. In exchange, you must pay your creditors back a court-approved amount, as opposed to a Chapter 7 which does not require a payment plan.
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