Individuals who declare bankruptcy do so to stop being pursued payment by their creditors. The federal government has jurisdiction over bankruptcy cases throughout the United States because of a provision in the Constitution. To exercise this authority, the federal government established the United States Bankruptcy Courts and, indeed, the Bankruptcy Code. A significant amount of a debtor's assets will typically need to be transferred to the bankruptcy estate to satisfy the court's requirements when they petition for bankruptcy protection. A bankruptcy trustee is in charge of a debtor's assets, and proceeds from selling those assets go toward paying the debtor's creditors. It is not required, however, that a debtor in bankruptcy surrender everything to the bankruptcy estate. Certain assets must be surrendered to the bankruptcy trustee in a Chapter 7 liquidation proceeding.

How Do Nonexempt Assets Function In A Bankruptcy Proceeding?

Both state and federal laws specify what kinds of property are exempt and what kinds are not. Some jurisdictions even give you the option of using either the state or the federal exemption scheme in your bankruptcy case, demonstrating how widely the laws vary. For example, if your government's exemption system doesn't enable you to keep the specific property, you can choose the federal system. You have a choice among the two systems in the following 19 states, including DC: Alaska, Fayetteville, Connecticut, Iowa, Kentucky, Massachusetts, Michigan, Minneapolis, New Hampshire, New Jersey, Nouvelle Mexico, New York, Ontario, Pennsylvania, Rhode Island, Texas, Vermont, Washington, as well as Wisconsin.

Alternatives To Declaring Bankruptcy Under Chapter 7

You may clear your debts by selling your possessions on your own. More effort on your part, but better than bankruptcy on your record. However, if you try to sell assets to avoid giving them up in bankruptcy and then subsequently file for bankruptcy, your case may be harmed. The court will examine your motivations for selling the property and decide if you attempted to conceal wealth or mislead the system. The trustee may reclaim the proceeds from the sale of assets, take some of your exempt property, or even refuse to discharge your debts.

How Is Nonexempt Property Treated During A Chapter 7 Bankruptcy?

In Chapter 7 bankruptcy, the trustee appointed by the court to oversee the case will sell any nonexempt assets to repay the debtor's creditors. By bankruptcy law, the trustee will distribute the proceeds from the sales to your creditors. Domestic support responsibilities (child and spousal support) and tax debt are considered priority debt and will be repaid before any other debt. The trustee will pay your no priority unsecured debts, including credit card balances, personal loan amounts, and utility payments, if there is any cash remaining after paying your priority debts.

What Happens To Property That Is Not Exempt In A Chapter 13 Bankruptcy?

Your nonexempt assets will be protected from sale by the trustee. Instead, you'll make a lump sum payment to your unsecured creditors equivalent to the value of the nonexempt property. You can't claim an exemption for your $15,000 yacht or $7,500 timeshare. Throughout the three to five-year program, you must pay a minimum of $22,500 to your unsecured creditors.

When You Need To Consult A Lawyer About Filing For Bankruptcy

Real estate exemption status is not always obvious. A piece of property may be exempt in certain situations but not in others. Musical instruments, for instance, are not exempt unless their owner engages in musical performance as part of their occupation. You can be sure that your file is complete and accurate and that as much of your property as possible is being listed as exempt with the advice of a lawyer who can help you determine what is and is not exempt.

Conclusion

The question then becomes, "How much does it cost to sell a house?" when you've finally decided to sell your home and go on a new journey. At the closing table, some sellers may be blindsided by the amount of money they could have invested in selling their house. But you won't be the one to fall into that trap! Making a budget in advance for the costs associated with selling your property will help you achieve your financial goals and come out on top. To help you weather the real estate market storm, we'll outline the typical expenses of selling a home. Before signing the final paperwork, many homeowners selling their homes have no idea how much the transaction will cost them.