If you’re thinking about filing for bankruptcy in the great state of Texas, you likely have many questions regarding the process. One big misconception about filing for bankruptcy is that you’ll have to give up all of your assets during the process. This is simply not entirely true.
The classes of assets during a bankruptcy
When a person undergoes bankruptcy, a list will be made of all their assets. These assets will be classified as either non-exempt or exempt assets. Assets classified as non-exempt will be sold by the trustee that is assigned to your case. The proceeds will be used to pay off your existing creditors. Some examples of non-exempt assets include secondary homes, newer model vehicles, non-retirement account investments, artwork, jewelry and even a valuable coin collection.
Apart from your non-exempt assets, the court will classify certain assets as exempt. Exempt assets are ones that are not sold to pay off your creditors. Some examples of non-exempt assets include an older model vehicle, furniture, family home, retirement accounts and tools required for your profession. These are items that you’ll need to continue to live and work on a daily basis.
Chapter 7 versus Chapter 13 bankruptcy
The most common type of bankruptcy to file for is Chapter 7. This is where a court-appointed trustee will classify assets as exempt or non-exempt. They will proceed to use the proceeds from the sale of the non-exempt assets to pay off your creditors. In Chapter 13 bankruptcy, none of your items are sold. Rather, Chapter 13 is all about working with a credit counselor to construct a payment plan for all of your existing creditors.
Before anyone can make a decision of whether or not bankruptcy is going to be the right course of action for them, it’s important to understand the different types of bankruptcies that are out there. When it comes to filing for Chapter 7 bankruptcy, you may end up paying back less money than a Chapter 13 bankruptcy. However, you’ll lose many of your assets in the process.