{"id":286904,"date":"2016-04-04T10:41:50","date_gmt":"2016-04-04T15:41:50","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/chapter-7\/exempt-vs-non-exempt-property-under-chapter-7.html"},"modified":"2024-06-20T10:15:00","modified_gmt":"2024-06-20T15:15:00","slug":"exempt-vs-non-exempt-property-under-chapter-7","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/chapter-7\/exempt-vs-non-exempt-property-under-chapter-7.html","title":{"rendered":"Exempt vs. Non-Exempt Property Under Chapter 7 Bankruptcy"},"content":{"rendered":"\n
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Exempt vs. Non-Exempt Property Under Chapter 7 Bankruptcy<\/h1>\n
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\n By Linda Sanabria, J.D.<\/a> | Legally reviewed by Susan Mills Richmond, Esq.<\/a>\n | Last reviewed\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Chapter 7 bankruptcy is sometimes called "liquidation bankruptcy." This is because it involves selling the filer’s property and assets to pay off as much debt as possible before discharging (eliminating) the remaining debt. But, bankruptcy law<\/a> protects some kinds of property from being sold off to pay these debts.<\/p>\n

These protections are called exemptions. Some exemptions protect entire types of property, while other exemptions may have limits on the value they protect, like a home. A filer’s tax filing<\/a> may also affect exemptions.<\/p>\n

A person filing for bankruptcy protection can expect to turn over a sizeable portion of their property to a so-called bankruptcy estate<\/a>. A bankruptcy trustee<\/a> manages this estate, selling the property to raise money to pay off a debtor’s creditors.<\/p>\n

People filing for bankruptcy want protection from their creditors on the collection of their debts. The U.S. Constitution gives the federal government power over bankruptcy. The federal government has established U.S. Bankruptcy Courts<\/a> and the Bankruptcy Code<\/a> to handle bankruptcy proceedings nationwide.<\/p>\n

Bankruptcy filers, whether businesses or individuals, are often justifiably concerned about what property they will be allowed to keep, what they must give up, and whether they will face foreclosure<\/a>. But a bankruptcy debtor doesn’t necessarily have to turn over everything to the bankruptcy estate because of the exemption system.<\/span>
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Read on to learn more about the differences between exempt and non-exempt property.<\/p>\n

How Bankruptcy Exemptions Work<\/h2>\n

Bankruptcy law allows debtors to keep a certain amount of property after bankruptcy proceedings. This is called "exempt" property<\/a> \u2014 it’s excluded from the bankruptcy estate.<\/p>\n

Property that can’t be exempted is called "non-exempt" property. Generally, a bankruptcy debtor can exempt a certain amount of their property during bankruptcy. If done correctly, this can save most of the property of someone going through bankruptcy<\/a>.<\/p>\n

Exempt property generally includes the "necessities of modern life." This typically includes the sort of items necessary for living and working. Bankruptcy law is concerned about getting debtors out of crushing debt and putting them back on their feet, with certain debts deemed very important remaining after bankruptcy<\/a>. Taking everything is counterproductive, and bankruptcy law recognizes this fact. Non-exempt property generally covers items outside the necessities for living and working.<\/p>\n

Court rulings and general practice experience have established a general idea of what types of property are exempt and non-exempt. Below are examples of property that a Chapter 7 bankruptcy debtor will usually have to give up and property that the debtor may usually keep.<\/p>\n

Non-Exempt Property<\/h2>\n

Non-exempt assets that a liquidation debtor usually has to give up include:<\/p>\n