One of the primary concerns when filing for Bankruptcy is what will happen to one’s to the assets after filing for Chapter 7 bankruptcy. Assets or property are anything owned by a person at the time of becoming bankrupt or anything bought or received before the end of the bankruptcy. Generally income earned during bankruptcy is not included but will be taken into account in the income contributions assessment.
When you file for bankruptcy, most of your property becomes property of the bankruptcy estate. There are exempted assets and non-exempted assets. Exempted assets are assets the debtor can keep whereas non exempted assets will be sold by the trustee for the benefit of the creditors.
The Bankruptcy Act sets out a list of exempted assets. Most personal property such as cash, bank accounts, furniture, clothes, and retirement plans can be protected by exemptions allowed by each state. Usually, most people that file bankruptcy are allowed to keep most, if not all, of their personal property. Every state has a homestead exemption, which protects one’s home from being forfeited in the event of bankruptcy.
The trustee will sell or distribute the non-exempt assets and any assets that have a value over a specified limit. The assets can be in your possession or someone else’s. Secured creditors who hold a security over an asset may take and sell the asset if the debtor falls behind in payments. Bankruptcy does not affect the rights of secured creditors.
Generally, in Chapter 7 Bankruptcy, most debts are forgiven. However, some financial obligations like student loans, child support and alimony and other penalties that the court may impose require to be paid. For paying off the obligations, the court may require the debtor to sell some off some of the assets or decide to forfeit the assets after bankruptcy to pay for the remaining obligations.