Handiling Non-Exempt Property In Bankruptcy
When a debtor files Chapter 7 bankruptcy
the bankruptcy trustee will need to determine if their property is exempt or non-exempt from the bankruptcy estate. Well, actually, determining the exempt status of a debtor's property is really the responsibility of the debtor and bankruptcy attorney if they want to maximize their use of the bankruptcy exemptions available. Bankruptcy exemptions are determined by the state and federal government.
However, many debtors use the state bankruptcy exemptions in Texas because they are very generous. Once a property's exemption status has been determined, the debtor will need to decide if they want to keep their non-exempt property. If they don't want to keep the non-exempt property, the bankruptcy trustee will liquidate the property and the proceeds from the property's sale will be used to repay creditors. But if the debtor wants to keep the non-exempt property, they may be able to buy the property back from the bankruptcy estate.
Here's how that works:
Let's say a debtor wanted to keep a second car that was not covered by the bankruptcy exemption. The bankruptcy trustee would first need to determine the value of the car. Let's say that the bankruptcy trustee determined that the car was worth $3,000. If the debtor wanted to keep the car, he/she would need to pay the bankruptcy trustee $3,000. However, there are some instances where a bankruptcy trustee may accept less than what the item is worth because even if they seized the car they would still need to pay to transport it, store it and advertise to sell it. If there is property that you want to keep that won't be protected by the bankruptcy exemptions, please discuss it with your bankruptcy attorney.