If you are considering filing for Chapter 7 or liquidation bankruptcy, you may be concerned about the future of your property holdings. The truth is that debt relief often comes at a cost -- meaning that you must forfeit some of your property if the conditions are right. Bankruptcy can be an incredibly beneficial financial move, but those pursuing such actions should realize that there could be very real consequences for the future of their assets. An understanding of exempt and non-exempt assets may help you decide whether filing for bankruptcy is truly your best option.
Bankruptcy law in Washington is designed to allow debtors to keep specific types of property after they complete their bankruptcy proceedings. After all, the purpose of bankruptcy is to assist filers with regaining financial traction -- not to send them to the poorhouse. Property that is exempted from seizure in a bankruptcy will generally relate to the "necessities of modern life." These can include vehicles up to a certain value, along with certain clothing, wedding jewelry, pensions, household appliances and tools of your trade. Other property may also be exempt from seizure, depending on the nature of your holdings.
Non-exempt property generally includes those extravagances that are not essential to maintaining your financial independence. These could include your second home, along with stock holdings, coin collections, expensive musical instruments and even family heirlooms. Cash and bank accounts may also be subject to seizure, though retirement accounts and pensions are generally protected.
This article does not provide a comprehensive list of exempt and non-exempt bankruptcy assets. Bankruptcy exemptions may differ based on your jurisdiction. Those who are considering filing for bankruptcy may benefit from the assistance of a financial and legal team to help them determine whether their property would be exempt during a bankruptcy proceeding.
Source: FindLaw, "Exempt vs. Non-exempt Property Under Chapter 7" Sep. 03, 2014