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Is selling assets in Chapter 7 bankruptcy legal?
Selling assets chapter 7 is a tricky part and may put you in legal jeopardy if you are not careful which properties to sell. In chapter 7, the idea is for a bankruptcy trustee to pool your assets together so that they can sell and the proceeds distributed to creditors depending on security and priority. Generally, selling assets in a chapter 7 is not allowed except when those assets are exempt. Exempted assets are those that are considered beyond the reach of the bankruptcy court. You need to discuss this with your lawyer to know the exempt assets for your state.
The assets you can sell will vary from state to state. These can include your house, the car you use to go to work, the tools for trade, and household goods. But take note that each state will have its own list of exemptions. In Maine for instance, you can get an exemption between $12,500 to $25,000 if there are minors living the house. This is higher in Montana, which allows up to $40,000 in home equity. In Arizona, the exemption for home equity is up to $100,000. There are also different exemptions for the measure of land you can save, depending on whether or not you live in a rural or urban area.
The best way to know the exemptions in your area is to consult a lawyer before filing for chapter 7. Generally though, chapter 7 cases are often no-exempt cases because the debtor has little property to save or sell.
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