Filing for bankruptcy can be a terrifying prospect, especially considering what could happen to your hard-earned assets. Will you lose your home, your car or your savings? The uncertainty can be overwhelming.
However, Chapter 7 bankruptcy, also known as liquidation bankruptcy, does not mean you have to give up everything you have worked for. In this blog, we will explore what happens to your assets when you file for this type of bankruptcy.
What are exempt and non-exempt assets?
If you are fit and eligible to file for Chapter 7 bankruptcy in the state, a court appoints a trustee to oversee your case. They will identify the properties creditors can repossess to pay off your debt. These are non-exempt assets, and they include:
- Investment accounts, stocks and bonds
- Rental properties or a residential property that is not your primary residence
- Luxury items
- Valuable vehicles
While these are assets that federal and state laws do not protect, there are some assets you can keep. These are exempt assets, and they include:
- Your primary residence
- One vehicle
- Up to 40% to 60% of your earnings from wages, depending on whether you are the sole breadwinner
- Personal property, such as household goods and clothes
- Worker’s compensation benefits
It is crucial to remember that creditors may still seize some of these assets in certain circumstances. For example, they can repossess your car if you are behind on your payments.
Protecting your assets
Filing for Chapter 7 bankruptcy doesn’t necessarily mean sacrificing all your assets. In fact, by grasping the intricacies of bankruptcy rules and exemptions, you have a chance to safeguard your valuable possessions. This process may entail strategic asset conversion, familiarizing yourself with Michigan’s exemption laws or engaging in negotiations with your creditors.
