For many individuals or sole proprietors preparing to file for bankruptcy, Chapter 7 is the preferred choice. Filing for bankruptcy under Chapter 7 allows an individual or sole proprietorship business to discharge most debts in exchange for the liquidation of nonexempt assets, the proceeds from which are used to pay creditors. Not all assets must be liquidated under Chapter 7, however. If you are considering filing under this chapter, it’s important to understand which types of property will be exempt during the process.
Generally, property that is exempt from Chapter 7 liquidation is anything considered a necessity of modern life. In other words, anything that is arguably necessary for living or working can be exempt. The most common examples of exempt property include motor vehicles, household appliances and reasonably necessary household good like furnishings, clothing and jewelry. Also included on this list are pensions, Individual Retirement Accounts, public benefits and damages awarded for personal injury claims.
Types of assets that are considered nonexempt, or unnecessary for living and working, include a second home or second vehicle, family heirlooms, valuable collections (such as coins or stamps), expensive musical instruments (unless the debtor is a professional musician), cash, bank accounts, investments, stocks and bonds. Exemptions vary widely from state to state.
Bankruptcy law is a complex area and is best navigated with the help of an experienced attorney. If you are preparing to file for bankruptcy under Chapter 7, an attorney can help you determine your eligibility, file the necessary paperwork and protect as many assets from liquidation as possible. Speak with an experienced bankruptcy attorney in Albuquerque right away.