What Are Nonexempt Assets in a Bankruptcy?

In Chapter 7 bankruptcy, you must sell your nonexempt assets to pay off as many of your debts as possible. If the court deems your assets unnecessary in maintaining a minimal standard of living, those assets are nonexempt. According to The Balance:

Nonexempt assets are those that can be sold by the trustee assigned to your case by a bankruptcy court.”

Some examples of nonexempt assets include:

  • Vacation homes or other properties that are not your primary residence
  • New or expensive cars
  • Musical instruments that you do not need for work
  • Valuable collections (stamp or coin collections)
  • Family heirlooms (antique furniture, etc.)
  • Investments outside of retirement accounts
  • Valuable artwork
  • Expensive clothing
  • Designer shoes or handbags
  • Jewelry with resale value

Many people who file for bankruptcy do not have nonexempt assets. When this happens, the bankruptcy case is a “no-asset” case, and the trustee will not liquidate (sell) any of your belongings.

Can the Trustee Take Everything?

Contrary to popular belief – and what TV shows and movies often depict – the bank cannot take the clothes off your back. Your bankruptcy trustee cannot sell items without value, nor can they sell things you need to live or work.

Exempt assets are assets the trustee cannot sell and may include:

  • An older or inexpensive car (i.e., the family minivan)
  • Furniture and everyday clothing
  • Tools required for your profession (your laptop, studio or office, business attire, etc.)
  • Health aids
  • Your retirement accounts

When you file for bankruptcy, the court will use state and federal laws to assess your financial situation and your assets. In New Jersey, you can even choose whether you want state or federal laws applied to your case.

Although the laws vary by state, the federal government allows you to keep assets with the following values (as of April 1, 2019):

  • $25,150 of equity in your home
  • $4,000 of equity in your car
  • $1,700 worth of jewelry
  • Up to $13,400 worth of furniture, appliances, and clothing
  • $2,525 for items essential to your business
  • $13,400 in assets from a life insurance policy
  • Things you need for your health (unlimited)

You may be thinking, “wow, $4,000 is not a lot for a car,” or “my house is worth more than $25,000.” If this is the case, know that you have other options.

An Alternative to Chapter 7 Bankruptcy

If you have a regular income and assets that you do not want to lose, you may want to consider Chapter 13 bankruptcy instead. This type of bankruptcy is also known as a “wage earner’s plan” because it allows you to make affordable payments for 3 to 5 years without liquidating your assets. Even if you cannot pay off your debts fully within your repayment period, you will not be responsible for the remaining debts.

At Busch, Reed, Jones & Leeper, P.C., we can help you file for Chapter 7 or Chapter 13 bankruptcy, and if you’re not sure which option is best, we can discuss that with you, too.

We have more than 150 years of combined experience handling cases like yours, your first consultation is 100% free of charge, and we are committed to protecting your interests and helping you reach your goals.

If you’re considering bankruptcy, please do not hesitate to call us at (770) 629-0154 or contact us online and schedule your free, confidential case review!

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