When filing for a Chapter 7 bankruptcy, certain assets will be categorized as exempt from seizure by the courts to pay off any claims by creditors. However, some assets might be declared nonexempt.
If so, you might wonder which of your assets would be nonexempt and what will happen to them in a Chapter 7 bankruptcy. The following information may be helpful to those facing financial crises.
Which assets are nonexempt?
Here in Massachusetts, debtors can choose to file using either the state or federal exemptions. Any that don’t fall into those categories are subject to seizure and sale to pay creditors’ claims.
But that doesn’t necessarily mean that your possessions will be seized and sold even if they technically exceed the court’s valuation rules.
Why you might be able to keep certain assets
While you should never assume that a nonexempt asset you claimed will not be seized, the truth is that some assets are too complicated to value, possess, maintain, sell and then distribute the funds to creditors. One example of unseized but nonexempt assets might be items in a rock ‘n’ roll memorabilia collection because of the difficulty of getting accurate appraisals and finding buyers within that community.
Can I buy back my own seized asset?
Technically, yes. If you can come up with the funds to buy your asset back, the trustee will sell it to you. Friends or family might also want to purchase assets to keep them from going to strangers.
Seized assets sometimes get abandoned by the trustees due to maintenance costs and other reasons. When that happens, nonexempt assets go back to the original debtor.
Never try to hide assets
If the trustee reports to the court that they suspect you of hiding nonexempt assets to qualify for Chapter 7 bankruptcy, your whole case could be dismissed. That will leave you in a worse position than if you had never filed your petition for bankruptcy.