The federal bankruptcy laws are complex, and an experienced advocate can help you navigate them efficiently. If you are contemplating filing for bankruptcy, contact a lawyer.
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Exempt vs. Non-exempt Property Under Chapter 7
In a Chapter 7 liquidation case, the debtor must relinquish certain property to the bankruptcy trustee so that he or she can sell the property and use the proceeds to pay off debts. Property of the bankruptcy estate is broadly defined in the Bankruptcy Code. 11 U.S.C. § 541. The bankruptcy estate is technically the legal owner of all of the debtor's property and consists of all legal and equitable interests that the debtor has in property at the initiation of the bankruptcy case. Income that the debtor earns after the date of the petition is not included in the bankruptcy estate. Debtors, whether they are businesses or individuals, are often justifiably concerned about what property they will be allowed to keep and what they must give up. A bankruptcy lawyer at Gillespie & Murphy, P.A. in New Bern, NC, can answer these and other questions, allay fears and keep the process moving forward as painlessly as possible.
Items that the debtor usually must forfeit include:
- Expensive musical instruments, unless the debtor is a professional musician
- Collections of stamps, coins and other valuable items
- Family heirlooms
- Cash, bank accounts, stocks, bonds and other investments
- A second car or truck
- A second home or vacation home
A debtor must file a schedule of exempt property with the court. Exempt property is property that the debtor can protect from liquidation. The Bankruptcy Code allows each state to adopt its own exemption laws, which the debtor can select instead of the federal exemptions. It is important to consult with an attorney who can explain the exemptions available under your state's laws and how they compare to the available federal exemptions.
Exempt property typically includes:
- Motor vehicles, up to a certain value
- Reasonably necessary clothing
- Reasonably necessary household goods and furnishings
- Household appliances
- Jewelry, up to a certain value
- A portion of the equity in the debtor's home
- Tools of the debtor's trade or profession, up to a certain value
- A portion of unpaid but earned wages
- Public benefits — including public assistance (welfare), social security and unemployment compensation — accumulated in a bank account
- Damages awarded for personal injury
Speak to a bankruptcy lawyer
If you have questions about what property you will be allowed to retain if you file for bankruptcy under Chapter 7 of the Bankruptcy Code, it is prudent to seek the counsel of an experienced and knowledgeable bankruptcy attorney. Contact Gillespie & Murphy, P.A. in New Bern, NC, today to schedule a consultation.
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