When you file for bankruptcy, the court will protect you from your creditors if you are approved. However, even though some of your debts can be dismissed, you may have to pay percentages of your debts back to your creditors. To provide money for this repayment, you may have to liquidate some of your non-exempt assets.
Bankruptcy liquidation most commonly occurs when you file for Chapter 7 bankruptcy. In this type of bankruptcy, a person, corporation, partnership, or other such entity must go through a means test to see if they debts can be dissolved. If approved for Chapter 7, a trustee is appointed to your case. This person will look at your property and determine your non-exempt property that can be sold for profits to pay back your creditors.
Liquidating your assets involves selling off certain property. In a bankruptcy filing, your assets are divided into two categories, exempt and non-exempt. While different states have different rules for what is considered exempt versus non-exempt, common types of non-exempt property include second homes, second cars, investments, valuable collections like stamps, and expensive musical instruments unless they directly relate to the person’s career.
Exempt property is usually deemed what a person needs to live life as normally as possible. This includes a primary home, motor vehicle, tools necessary for a person’s trade, and reasonably necessary appliances and clothing.
Navigating the legal entanglements of bankruptcy can be tricky. If you or someone you know is considering bankruptcy, you should speak to a lawyer to help protect your legal rights. For more information, contact the experienced Birmingham bankruptcy attorneys of [firm-name], by calling [phone-number].