Harassing creditors, past-due bills and unpayable debts can put tremendous strain on a person who is already struggling financially. Bankruptcy is a trusted and safe option for most people in Kentucky who are facing insurmountable debt, but many have understandable concerns. What property a person will be able to keep during Chapter 7 bankruptcy tends to be a common worry.
When filing for protection through Chapter 7 bankruptcy, individuals are expected to liquidate some of their property into a bankruptcy estate. The property in this estate is then sold to help pay remaining debts. While this is an important part of Chapter 7, it does not mean that debtors must immediately fork over all their property and assets, as certain properties are considered exempt.
Exempt property is typically considered necessary for modern life, and applies to property that is necessary for work and living. Many people can expect to keep their motor vehicles, although there is a value limit that might push a vehicle into non-exempt territory. Necessary clothing and household goods, pensions, trade-related tools and public benefits also tend to fall in the exempt category.
Non-exempt property are items deemed nonessential for day-to-day life. Non-exempt property might hold emotional value to a person, such as family heirlooms or musical instruments that are not related to work, but must still be turned over to the bankruptcy estate. Second vehicles, cash and investments are also usually non-exempt.
It can be difficult to imagine parting with property that holds emotional significance to a person. However, bankruptcy does not require that a person immediately give up everything that he or she owns to pay off old creditors. Chapter 7 bankruptcy allows for exempt property while those struggling financially in Kentucky pursue a more financially stable future.
Source: FindLaw, "Exempt vs. Non-exempt Property Under Chapter 7", Accessed on Oct. 2, 2017