Options for Saving Non-Exempt Assets in Bankruptcy

If you are declaring bankruptcy, you may have heard of exempt and non-exempt assets... but what do those mean? Non exempt assets are those assets that are seized and sold in certain types of bankruptcy. So, if you are planning on declaring bankruptcy to wipe out your debts, is there anything you can do to save non exempt assets?

Non-Exempt Assets in Bankruptcy

The distinction between exempt and non-exempt assets comes into play only in Chapter 7 bankruptcy. Chapter 7 is the bankruptcy that most people think of when they think of bankruptcy. When you declare Chapter 7, all of your non-exempt assets are seized and sold by a trustee. The trustee then distributes the money to your creditors to pay off as much of your debt as possible. Once the assets are sold and used to pay debt, any debt that is left over is forgiven and you don't have to pay it.

Exempt assets include a set amount of home equity (that varies by state) as well as pensions and 401K accounts. Certain other things may be exempt as well, such as an inexpensive car or a wedding band (engagement rings are usually not exempt and can be taken). Anything that is not considered exempt can be taken by the bankruptcy trustee and sold to satisfy debts.

If you are declaring Chapter 7, there is not that much you can do to save non exempt assets. Putting them into other people's names or selling them and putting the cash into an exempt retirement account are, in the vast majority of cases, illegal and/or fraudulent and your bankruptcy motion can be denied or you can even face accusations of fraud if you try these methods.

The best way to save non exempt assets is to declare Chapter 13 bankruptcy instead. Under Chapter 13, you get to keep your stuff. Your debts are restructured and you come up with a payment plan in which you pay back at least some of your debt to credits every month for a period of three to five years. For many people, chapter 13 bankruptcy is the only option- to declare Chapter 7, you now have to pass a means test and prove you make less than the median income or that you can't pay your debts and still have enough to live on. Still, even if you have a choice between Chapter 7 and Chapter 13, if you are concerned about keeping your possessions and assets, Chapter 13 may be best for you.

Getting Help

If you are trying to save non exempt assets from bankruptcy or trying to decide what type of bankruptcy is best for you, you should consult with an experienced bankruptcy attorney who can guide you through the process.

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