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Are some assets exempt in a Chapter 7 bankruptcy filing?

Readers may be aware that a bankruptcy filing may temporarily affect one’s credit score rating. However, considering the protections offered by either a Chapter 13 or Chapter 7 filing, any temporary effect may be small tradeoff. 

For example, a low credit score rating may make it harder to qualify for new credit cards or loans. However, one’s credit score can be even more negatively affected by missed loan or debt payments. If debts are unmanageable and are leaving little income left over for necessities such as food and clothing, then a bankruptcy might indeed be the smarter move. 

It’s also important to remember that the type of filing will offer different protections under the federal bankruptcy code. Under Chapter 13, the bankruptcy trustee will endeavor to devise a monthly payment plan that is manageable. Under Chapter 7, a debtor’s nonexempt assets are sold off and the proceeds are applied to his or her debts. In some cases, an individual’s home may qualify as an exempt asset under Chapter 7. Other assets that may qualify as exempt include clothing, basic home furniture, and possibly an individual’s car.

In a Chapter 7 bankruptcy, there is typically some level of equity that can be protected in certain assets, such as an individual’s car. If an asset is worth too much, however, a trustee may favor selling it pay off debts. However, a trustee is also interested in enabling an individual to have a viable way of earning income after the fresh start offered by a bankruptcy filing. Thus, an attorney may be able to work with a debtor in proposing strategic approaches to the trustee.

Source: Wise Bread, “3 Times Bankruptcy Is The Right Move,” Dan Rafter, November 9, 2015

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  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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