When many people hear the word bankruptcy, they often think about the prospect of losing it all. That’s not always the way things work out, though. While Chapter 7 bankruptcy does involve the liquidation of your assets to pay off your creditors, some property may be exempt from this process.
What’s the difference between exempt and nonexempt assets?
Generally, the bankruptcy court considers any property that they can liquidate as a nonexempt asset. Some debtors don’t have any property that qualifies as such, though and thus, the court may deem that person’s case as nonexempt. Creditors won’t receive any money from you if you file such a case.
Each state classifies assets into exempt and nonexempt categories differently. The federal government has its own definition for each of these categories as well. Some states allow debtors to choose between the two different interpretations of these concepts.
Items that are typically considered nonexempt assets include any residence other than your primary one and any car you own that has equity built up in it. Other valuable possessions that you may have, including nonemployment-related musical instruments, jewelry, investments, clothing, coin or stamp collections and artwork, may also qualify as nonexempt assets from the bankruptcy court’s perspective.
What happens if you have nonexempt assets?
Any debtor that files for Chapter 7 bankruptcy who has nonexempt assets can expect their creditors to file claims against them. The trustee presiding over your case will seize them, sell them off and disburse any proceeds to the creditors. There are some rare situations in which the court may not sell off your nonexempt assets because they’re too difficult to sell or they have too little of value.
Although it may be tempting to hide assets so that you don’t have to part ways with them, you shouldn’t, as it’s illegal to do so. The court may also attempt to recover any property that you sell off immediately before filing bankruptcy and even discharge your case. You may also face charges for bankruptcy fraud, which is a felony.
The prospect of losing your possessions can be both scary and disappointing. An attorney can go over what Oklahoma law classifies as exempt and nonexempt property. Your Norman lawyer can then help you determine whether filing for Chapter 7 bankruptcy is ideal for you in your situation.