After filing for Chapter 7 bankruptcy, you may be worried about having to turn over your possessions to a bankruptcy estate. Not all bankruptcy cases require property turnover. In fact, many Chapter 7 filers will not have to relinquish any possessions at all.
Even in cases that do require property turnover, it is unlikely that you will be left completely empty-handed. This is because some property is safe from being turned over, even if you have large debts. This post will discuss which types of property you may keep—and which you must give up—in a Chapter 7 bankruptcy case.
Exempt vs. non-exempt
Property in bankruptcy cases is divided into two categories: Exempt, and non-exempt. When property is exempt, it means that it is protected from turnover during the bankruptcy process. Non-exempt property, however, is not protected, and may have to be turned over to a bankruptcy estate.
Bankruptcy law provides exemptions for certain kinds of property. To be exempt from turnover, a piece of property typically must be a necessity that is required for working or day-to-day living. This includes a reasonably necessary amount of clothing, household furnishings and appliances. Any government assistance that you are receiving is exempt, as it is necessary for your day-to-day needs. Your pension plan will also be safe, since it will be a necessity for your future.
Property that must be turned over is composed of non-essential luxuries that have a high value. You won’t need these items to survive day to day, so you may have to turn them over to a bankruptcy estate. First and foremost, you may very well have to turn over your bank accounts, stocks and other investments. Any expensive musical instruments, valuable collections or collectors’ items and even family heirlooms are also subject to turnover. If you have a second house or car, you will probably have to turn them over; most filers are allowed to keep only one home and a car that falls under a certain value.