Alabama residents who are unable to pay their debts might hesitate to seek protection through Chapter 7 bankruptcy because of a fear that they will lose everything they own. However, people who file for bankruptcy can choose between the state or federal bankruptcy exemptions to protect some of their assets. Exempted assets will not be seized or sold by the trustee during bankruptcy. However, assets that are non-exempt might be sold to repay a portion of what is owed to the unsecured creditors.
What are non-exempt assets?
Non-exempt assets are various types of property that do not fall into one of the state or federal exemptions. When people file for personal bankruptcy protection under Chapter 7, they can choose whether to use the state’s bankruptcy exemptions or the federal bankruptcy exemptions. It is a good idea to look at both to determine which might provide more protection. Any non-exempt assets can be seized by the trustee and sold. The proceeds will then be used to repay a portion of what is owed to the unsecured creditors.
Can non-exempt assets be protected?
Some non-exempt assets might be protected. For example, people can compare the state and federal exemptions to choose those that protect a greater portion of their assets. They cannot pick and choose exemptions between the lists. People who have non-exempt property that cannot be protected in Chapter 7 might also consider filing for Chapter 13 bankruptcy. This type of bankruptcy does not involve the liquidation of assets to repay debts. Instead, debtors will repay a portion of what they owe in installments over a period of up to five years.
In many cases, people can keep most of what they own when they file for bankruptcy protection. People who are struggling under the weight of unmanageable debt may want to speak to an experienced bankruptcy lawyer about their options.