What Happens to Your Property?
If, after the creditors meeting, the trustee determines that you have some nonexempt property, you may be required to either surrender that property or provide the trustee with its equivalent value in cash. If the property isn’t worth very much or would be cumbersome for the trustee to sell, the trustee may “abandon” the property — which means that you get to keep it, even though it is nonexempt.
What Is Exempt Property?
Each state has laws that determine which items of property are exempt in bankruptcy, and in what amounts. These items cannot be seized by creditors or by the bankruptcy trustee. Many states exempt health aids, “personal effects” (things such as electric shavers, hair dryers, and toothbrushes), ordinary household furniture and clothing without regard to their value.
Other kinds of property are exempt up to a limit. For example, in many states, furniture or a car is exempt to several thousands of dollars. This exemption limit means that any equity in the property above the limit isn’t exempt. (Equity is the market value minus how much you still owe.) Typically, the following items are exempt:
- part of the equity in motor vehicles (the amount varies from state to state)
- reasonably necessary household goods and furnishings
- household appliances
- jewelry, to around a thousand dollars
- personal effects
- life insurance (cash or loan value or proceeds), (the amount varies from state to state)
- a portion of the equity in a residence (up to $40,000.00 in Wisconsin, however, the amount varies from state to state)
- pensions, IRAs, 401(k)s, 403(b)s
- public benefits
- tools of a trade or profession, to a certain value, and
As it turns out, most property owned by Chapter 7 debtors is either exempt or is essentially worthless for purposes of raising money for the creditors. As a result, few debtors end up having to surrender any property, unless it is collateral for a secured debt. In any case, whether our client stands to lose property in a bankruptcy case is an issue that the attorneys at Hanson & Payne, LLC, review at length prior to each case being filed. Before any case is filed, we explain the risks, if any, that our client may lose any property.