If you file for bankruptcy, you will have to turn over much of your property to your bankruptcy estate. However, you will not have to turn over exempt property. In this article, we define and give examples of exempt property.
In Chapter 7 and Chapter 13 bankruptcy, a large number of a debtor’s assets must be turned over to a bankruptcy estate. The bankruptcy estate is managed by a bankruptcy trustee who sells off the property in order to pay creditors.
However, not all property can be sold. Exempt property is any property that creditors cannot seize and sell in order to satisfy debts. In contrast, non-exempt property is any property that cannot be exempted.
The goal of bankruptcy is to help debtors get back on their feet, so it is not intended to take everything that a debtor has left. That is why, generally speaking, exemptions are given to property that an individual needs to maintain a job and household, otherwise called necessities of modern life. The exact property that is considered exempt differs from state to state, but it can include things like:
In contrast, property that typically cannot be exempted includes:
Additionally, some states give debtors a choice between the state exemption list and federal bankruptcy exemptions. The exact list it is best for an individual to choose will depend on the type of property that they own.
To help you understand which property of yours will and will not be exempt, and to help you decide whether to choose the state or federal exemption list, it is highly recommended to work with an experienced bankruptcy attorney.