Chapter 7 bankruptcy comes with generous exemptions, but some assets could still be at risk. Your income must be below Texas’ median income to file for Chapter 7 bankruptcy, or the excess income you earn needs to meet the means test requirements. Disabled veterans who fell into debt primarily through homeland defense or active duty are exempt from needing to pass the means test. People whose debts aren’t primarily consumer debts are also exempt from the means test.
The house you currently live in and the car you use to commute to work are usually exempt assets in bankruptcy. You need to have minimal equity in your car for it to be exempt. Everyday clothing, basic furniture, tools and equipment that you need for work and retirement accounts are also safe from your creditors in bankruptcy.
Assets that aren’t exempt are essentially everything that you don’t need for survival. If you have two cars, then one of them isn’t exempt because the law will say you only need one car. Designer clothing, expensive jewelry and valuable artwork are also nonexempt assets.
Investments that aren’t in retirement accounts aren’t exempt from creditors. Any residential property that’s not your primary residence is also nonexempt. If you have any valuable collections, the trustee on your case could sell them to pay off your debts.
When you have nonexempt assets, you may want to sell them on your own instead of leaving it to the trustee. You could get more money out of them on your own.
Federal law has monetary limits on how much of a type of property is exempt from confiscation. Under federal law, you can protect $1,700 worth of jewelry and $4,000 in a car.
When you file for bankruptcy, you don’t need to worry about losing everything. Bankruptcy can actually protect you from bigger losses because bankruptcy laws protect a certain value of essentials, including your primary residence. If you have questions about what property you’ll get to keep, you may want to ask an attorney.