Lawyers refer to Chapter 7 bankruptcy as “liquidation bankruptcy” for a reason. During the process, assets are identified and categorized as either exempt or nonexempt. You are expected to honestly identify all of your assets to the courts or face legal repercussions. The topic of exempt and nonexempt assets is a state-to-state issue with an overarching federal guideline.
Examples of Exempt Assets
The courts cannot sell exempt assets. These assets range anywhere from jewelry to awarded damages for a personal injury. In Louisiana, in particular, exempt assets include:
- Up to 200 acres of non-municipal land
- Up to $35,000 for a home
- 75% of disposable income
- An automobile worth up to $7,500
- Trade and business tools
- Instruments or books
- Clothing, furniture, and appliances
- $5,000 in engagement or wedding ring value
Examples of Nonexempt Assets
Nonexempt assets, on the other hand, are not safe and are required to be brought forth for sale. Oftentimes, individuals will try to hide certain nonexempt assets in an attempt to hold onto their valuable possessions. If you choose to do so, you will be referred to the U.S. Trustee’s office where they can issue a court order to have your property searched.
Assets that can be legally sold by the courts to satisfy debt include:
- A second home or car
- Investments, stocks, and bonds
- A valuable collection
- Expensive artwork
What Happens to Nonexempt Property?
At the beginning of the bankruptcy process, you are issued a court-appointed trustee to manage your case. The trustee will sell your nonexempt assets and use the proceeds to fulfill your debts with creditors per bankruptcy law. Tax debt, child, and spousal support is considered priority debt and requires immediate payment. If you do not have any priority debts or have funds left over after paying them, it is used to address nonpriority unsecured debts. Such debts include personal loans, credit card balances, and utility bills.
At E. Orum Young, we have over 35 years of experience and have filed more than 20,000 bankruptcy cases in Northeast Louisiana. We pay personal attention to every case and have rush filing services available if needed. Our Trial Guarantee ensures that we will take your case to trial per your request. Contact us today for a free case evaluation.