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Identifying exempt property under Chapter 7 bankruptcy laws

Identifying exempt property under Chapter 7 bankruptcy laws

Virginia residents may be interested in information about what happens to a person’s property when they file for Chapter 7 bankruptcy. Bankruptcy law allows them to keep certain property in order to start their new post-bankruptcy life.

A Chapter 7 bankruptcy allows a person struggling with debt to discharge what they owe and eliminate that debt. During the bankruptcy process, most of the person’s property is turned over to what is known as the bankruptcy estate. This property is sold and the proceeds are used to pay the person’s creditors. However, some of the person’s property is not subject to this asset liquidation. This property is known as exempt property.

Generally, the law allows so-called “necessities of modern life” to be exempted from bankruptcy liquidation. The law is tailored around the fact that, if everything is taken from a person, they have a more difficult time getting their finances together post-bankruptcy. Therefore, bankruptcy law allows property that is necessary for work and life to be kept through the bankruptcy. This usually includes items such as vehicles, a portion of the equity in their primary residence, clothing, furniture and public benefits like Social Security disability and unemployment benefits. Not exempted are items such as a second vehicle or home, money in a bank account and family heirlooms and valuable pieces of personal property.

Understanding what can and cannot be kept after the Chapter 7 bankruptcy process may be difficult without the advice and counsel of a bankruptcy attorney, who may be able to assess a client’s situation and determine whether or not bankruptcy is the appropriate course of action. The attorney may then be able to help with the filing and guide the client through the process before and after discharge.

Source: Findlaw, “Exempt vs. Non-exempt Property Under Chapter 7“, August 19, 2014

Source: Findlaw, “Exempt vs. Non-exempt Property Under Chapter 7“, August 19, 2014