Real estate, automobiles, and business property are liquidated and auctioned when you file for bankruptcy to repay creditors.
However, not all assets are subject to liquidation; exempt assets may be retained by the debtor.
What Are The Three Categories Of Assets For Bankruptcy?
In order to grasp what may be at stake, it is essential to recognize which assets may be liquidated in a Chapter 7 bankruptcy.
In Bankruptcy, There Are Three Sorts Of Assets:
Personal effects. These are the material items, which include clothing, furniture, works of art, and automobiles.
Real estate. Land and structures, such as a house or barn, that are attached to it are called real property.
Nontangible assets. As their name implies, intangible assets are items that are not physically tangible yet still have worth. Intangible assets consist of retirement funds, alimony, and child support.
Exempt And Nonexempt Assets When You File For Bankruptcy
Not every asset is liable to liquidation in bankruptcy proceedings. According to federal or state law, certain assets may be protected from liquidation. Clothing, tools required for the job or health-related activities, and other assets may qualify for exemptions.
When a debtor files for bankruptcy, a trustee is appointed by the court to oversee the debtor’s non-exempt assets. Nonexempt property is not protected by the Bankruptcy Act and may be liquidated for cash. The sale revenues of nonexempt assets are then allocated to creditors.
Should I List Everything?
As part of the bankruptcy procedure, individuals are required to present a court with a complete inventory of their assets, including any real estate, savings, and investments. This is known as an asset schedule. This paperwork must be filed correctly and completely for the bankruptcy case to start without a hitch.
A schedule of assets must include both secured and unsecured assets. The following are examples of assets in bankruptcy filings:
- Real estate pertaining to a business
- Financial assets (e.g., investments or deposit accounts)
- Land or a principal or secondary residence
- Personal and domestic possessions
- Real estate associated with agriculture and commercial fishing
- Vehicles
- Other attributes not else specified
Only the debtor’s assets at the time of bankruptcy filing are included in the bankruptcy estate and examined for liquidation. The court relies on the debtor to submit an exhaustive list of all assets so that the trustee can administer and liquidate the estate as necessary. Listing any of the assets as exempt necessitates the submission of a separate schedule.
What Happens If You Fail To Mention Every Asset?
As you sign your bankruptcy petition, you affirm under pain of perjury that the submitted information and assets are correct and complete. This is a serious topic, and it is essential that you comprehend the repercussions of your actions.
Bankruptcy fraud is a heinous offense punishable by up to twenty years in jail. Intentionally or unintentionally omitting assets from a bankruptcy filing could be deemed bankruptcy fraud. The bankruptcy discharge petition could be denied or canceled if the debtor conceals or wilfully fails to disclose assets. Up to $250,000 in fines may be imposed for perjury with bankruptcy fraud.
What Is A Bankruptcy Case With No Assets?
In the majority of bankruptcy filings, there are no nonexempt assets that can be liquidated to reimburse creditors. This is the most prevalent Chapter 7 bankruptcy type.
Even if there are no unprotected assets to sell, the trustee must nonetheless file a “no assets” report with the court. This indicates that no distributions will be made to unsecured creditors in the bankruptcy case.
The trustee may have the ability to reclaim and sell non-exempt bankruptcy estate assets. Creditors who are owed money by the debtor will be notified by the court and will be required to make a claim within a set timeframe in order to obtain any proceeds from the sale.
Important Factors
People filing for bankruptcy should be aware of a few critical factors that can affect the value of their assets and the items they can claim as exempt. This consists of:
- Each state has a unique list of assets that are immune from seizure. In addition to federally exempt assets, states can implement their own list of exempt assets.
- There exists a maximum value for exempt assets. States also impose maximum restrictions on exempted assets, which are typically represented in dollars. In California, for instance, jewelry is an exempt asset provided its entire value does not exceed $8,725.
- The bankruptcy filing options for married couples are either separate or jointly. Filing jointly may bring certain advantages, but each spouse must still detail all of their assets for the court to obtain an accurate financial picture of the family.
- A debtor may choose to reaffirm a debt in order to retain the accompanying property. Reaffirming the debt signifies the debtor’s written agreement to continue paying payments and being liable for the debt. This contract is then filed with the court, and the creditor agrees not to reclaim the property as long as the debt account is in good standing.
Next Actions
The process of declaring bankruptcy can be challenging and stressful. One of the most important things to remember is to be truthful about all of your assets, regardless of how tiny or insignificant they may seem. It is preferable to err on the side of over-disclosure than to attempt to conceal assets, as this could come back to harm you in the future.
To complete the bankruptcy schedule forms, you must submit specific details about each asset you possess or in which you have an interest. This consists of a description of the asset, its value, and the proportion of the asset that you hold. Consultation with a bankruptcy counsel can assist you to file your schedule of assets and comprehend your state’s exemption requirements.
