When faced with bankruptcy, the first thing to enter our minds is losing alot of money and being unable to get back on our feet. We usually think of having to sell all of our possessions just to make ends meet and having creditors knock on our door to seize all of our properties. While there is a grain of truth to some of this, it isn’t always the rule. There is a procedure that must be followed and this is what the blog entails.
Once faced with bankruptcy we have to determine which items are exempt and nonexempt. Exempt property are assets that will not be sold since these are deemed as essential for day-to-day living and working. Examples of these are cars and professional tools or tools used for work. Nonexempt properties are the opposite. These are usually collectibles or extra luxuries that you can afford to sell in order to pay for living expenses.
Filing bankruptcy doesn’t always mean losing all your property. Bankruptcy filing can be viewed as a means to reevaluate our lives and start all over again. Allow this blog to be your guide on differentiating exempt property from nonexempt property in bankruptcy along with how to handle them depending on the type of bankruptcy you’ve filed.
If faced with bankruptcy and debt issues, seek legal counsel for help in addressing your financial problems. Enlist the help of a Northeast Louisiana bankruptcy attorney who can explain the processes to you and ensure that you come out on top of this financial struggle.
Exempt Property vs. Nonexempt Property in Bankruptcy
When people go bankrupt, there are things they can sell to make a profit, and there are things they protect from creditors. When a person who has a large amount of assets goes bankrupt, they can transfer these assets to a bankruptcy estate whose trustee manages and administers the properties. It is the trustee’s duty to sell the properties with the accumulated income paid to the filer’s creditors.
When items are exempt in a bankruptcy case, the law will allow people to keep part of their property. This property is known as an exempt property. Exempt assets, as explained above, are the individual’s needs for living and working, such as cars and professional tools. The reason these are considered exempt is because the debtor has to generate income to get out of debt and one of the ways to get it is to work. The seizure of these objects is counterproductive to that goal.
Non-exempt assets in bankruptcy include musical instruments, family heirlooms, collections, and vacation houses. Anything used for hobbies or entertainment that the debtor can afford to give up without directly affecting their lifestyle or professional life.
Filing for bankruptcy can get complicated and most could be hesitant about giving up some properties. That’s why it’s important to seek the legal counsel of an experienced bankruptcy attorney who can guide you through the process and explain the complicated terms to help you get your life back on track.
Nonexempt Property in Chapter 7 Bankruptcies
What happens to your property depends on the type of bankruptcy you file for. Most people file for Chapter 7 bankruptcy because the qualifications are quite achievable, simply because they don’t need to pay any debt. A person can also qualify for Chapter 7 bankruptcy if his or her income is less than the state’s median income.
Chapter 7 bankruptcy takes a long time to process, about four to six months. Chapter 7 bankruptcy also has a concept known as automatic suspension. The automatic suspension prevents creditors from taking what is owed to them. Creditors cannot foreclose on salaries, cars, homes and accounts.
Likewise, a non-exempt property in this bankruptcy will mean that your bankruptcy trustee will sell properties that are not declared exempt to generate income to pay off debts and living expenses. Any overriding debt you have, such as child support, usually gets paid first.
Nonexempt Property in Chapter 13 Bankruptcy
If you have a higher and more substantial income but are not in business, Chapter 13 bankruptcy is what you should present. Chapter 13 bankruptcy eligibility involves an individual with a debt that does not exceed the designated limit, whether secured or unsecured. The applicant must also prove that they have enough money for the payment plan.
For the non-exempt property in this bankruptcy, the bankruptcy trustee will not sell his items, but rather the applicant is required to assign the equivalent amount of the non-exempt property to unsecured creditors.
If the terms and conditions are rather complicated to understand, it is best to enlist the help of a legal professional who is experienced in the area of bankruptcy law. The bankruptcy attorney can help you in any situation involving your property that you may find difficult to handle, to ensure a smoother transaction.
Certain Conditions for Nonexempt Bankruptcy
For nonexempt property in bankruptcy, it can be quite tempting to think if there is something you could possibly do to save some of these assets, especially those with quite some sentimental value to you. There are certain conditions one must follow in order to keep or swap nonexempt property in bankruptcy.
Trustees take care of the properties, selling these off to creditors in order to pay for debts and living expenses. Leisure properties, hobby equipment, and vacation houses typically qualify as nonexempt property in bankruptcy. The filer can keep some of these nonexempt property if the trustee abandons the estate. Should this happen, the filer can buy it back from the trustee or swap it for another property in agreement to the trustee’s terms.
A trustee abandons nonexempt property in bankruptcy if it is found that the loan secured property’s value is higher than its market value and if the items aren’t worth much, leading the trustee to earn little to nothing at all. In this instance, the filer would be able to keep this property.
To avoid confusion and smoothen out complications, seek the advice of a Northeast Louisiana bankruptcy attorney who can explain and walk you through the bankruptcy process.
Seek Legal Advice
Going through bankruptcy can be tough and facing it alone can only add to your burdens. Thankfully, you don’t have to go through this grueling financial situation alone. Consult a bankruptcy attorney at E. Orum Young Law by contacting (318) 450-3192. The bankruptcy specialists can help you navigate the ins and outs of bankruptcy and ensure that you get your life back on track. Schedule an appointment with a Northeast Louisiana bankruptcy specialist now.