In a Chapter 7 bankruptcy, certain assets are liquidated and the proceeds are applied toward debt. As part of the liquidation, the debtor must turn over certain property to the bankruptcy trustee so that he or she can sell the property and use the proceeds to pay off debts.
Naturally, a person considering a bankruptcy filing will be concerned about what property they will be able to keep after the bankruptcy. A debtor’s assets become part of the bankruptcy estate upon filing of a bankruptcy petition. Property of the bankruptcy estate consists of all legal and equitable interests that the debtor has in property at the initiation of the bankruptcy case. The bankruptcy estate also includes any income earned after the filing of the bankruptcy Petition.
Certain types of property are exempt from liquidation in a chapter 7 case. Each state is allowed to adopt its own exemption laws. Generally, the following types of property may be exempted from liquidation in a chapter 7 filing:
- Tools of the debtor's trade or profession, up to a certain value
- Farm equipment and tools up to a certain value ($3,000 in KY)
- Motor vehicles, up to a certain value ($2,500 in KY)
- Reasonably necessary clothing and personal effects, including some jewelry
- Reasonably necessary household goods and furnishings, including appliances
- Pension accounts
- Equity in your home, called a homestead exemption. Under the Bankruptcy Code, you can exempt up to $20,200 of equity. Kentucky allows debtors to protect $5,000 of their home equity.
- Social security and unemployment compensation benefits
- Damages awarded as part of a personal injury claim
However, certain property is not exempt and must be turned over for liquidation. Common examples include:
- Collector’s items, including stamps, coins, instruments and other valuable items
- Cash, bank accounts, and investments
- Secondary vehicles
- Homes not used as the debtor’s primary residence
Louisville Bankruptcy Attorneys
If you are interested in finding out if chapter 7 bankruptcy relief is right for you, please call (502) 589-9353
or contact us online to learn about how we can help you. Our bankruptcy lawyers
proudly represent clients throughout Jefferson and surrounding counties. We are dedicated to providing cost-effective results for our clients. Your initial consultation is FREE.