Non-Exempt Property in Bankruptcy
Nonexempt property refers to unprotected property a debtor owns during bankruptcy proceedings. While exempt property is protected, what happens to nonexempt property depends on factors such as the type of bankruptcy chapter that you filed. Filing for bankruptcy does not mean that you will lose all your belongings, even if you file for Chapter 7 liquidation bankruptcy. Exemptions apply to help protect assets such as your vehicle, home, and necessary equipment for your work. The skilled bankruptcy attorneys at Bankruptcy Center of Illinois assist DuPage County residents in understanding the different types of bankruptcy and how they affect their assets. We guide clients through the process of filing for bankruptcy and moving toward financial freedom.Non-Exempt Property in Bankruptcy
When you file for bankruptcy in Illinois, applying an exemption can help you keep property. Exemption laws differ by state, and a skilled DuPage bankruptcy attorney can help you apply all appropriate exemptions to specific property, such as a vehicle or a residence. However, not all types of property are covered by exemptions, for example, sports cars or expensive jewelry may not be protected. Non-exempt property will not appear in a list of exemptions for Illinois, for example.
An estate includes property the debtor owns at the time they file for bankruptcy. Property may include physical property, such as a car, as well as rental income. During bankruptcy, a trustee controls property and sells it in order to pay creditors owed debt. Whether you are able to hold onto your non-exempt property will depend upon the type of bankruptcy that you filed.Non-Exempt Property in Chapter 7 and Chapter 13 Bankruptcy
Typically, individuals seeking to file bankruptcy either choose Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is sometimes called liquidation bankruptcy. A debtor’s non-exempt assets will be sold by the trustee to pay off debts. Bills are paid in an order determined by bankruptcy law.
Bankruptcy debts are categorized as either priority unsecured or non-priority unsecured debts. Priority unsecured debts may include spousal support, unpaid taxes or arrears in child support. Non-exempt assets then apply to non-priority unsecured creditors. This often includes credit card companies, utility companies, and individuals owed personal loans.
Individuals with little property that file under Chapter 7 may be able to exempt nearly all of their assets, since there are not many. At the end of bankruptcy proceedings, their non-priority unsecured creditors may not collect on debts. Instead these debts will most likely be discharged. It should be noted that there are certain types of debt that cannot be discharged, namely, student loans, taxes, and domestic support.
Individuals that file Chapter 13 bankruptcy will face a different scenario. Unlike Chapter 7, Chapter 13 bankruptcy does not involve a trustee selling nonexempt property. In this type of bankruptcy, the debtor pays an amount of money equal to the value of the nonexempt property to unsecured creditors.
It is important to understand that the amount of non-exempt property affects the amount of monthly payments you must make under your repayment plan. Additionally, a repayment plan must be completed within a set period of time. According to law, this is usually three to five years. In other words, exemptions help set the amount that you must pay creditors in a Chapter 13 bankruptcy. It can be challenging for debtors facing financial stress to meet the required monthly amount, particularly if they own a lot of property but are not receiving a significant amount of income.Discuss Your Bankruptcy Needs with a DuPage County Lawyer Helping People Retain Assets
At the Bankruptcy Center of Illinois, we can advise you on potential non-exempt property in bankruptcy and provide guidance on next steps. Our knowledgeable attorneys suggest long-term solutions to financial challenges, and are here to serve clients in DuPage and nearby communities. To schedule a free consultation, contact our office by phone at (773) 993-0024 or reach us online.