Chapter 7 bankruptcy is a type of bankruptcy filing that’s commonly referred to as liquidation because it involves selling the debtor’s assets in bankruptcy. Assets, like real estate, vehicles, and business-related property, are included in a Chapter 7 filing.

However, not all assets under Chapter 7 are liquidated — certain assets are exempt from sale proceedings and can stay with the debtor.

What are the three types of assets when filing bankruptcy?

To understand which assets are at stake for liquidation under Chapter 7, it’s helpful to know the types of assets that can be included in a bankruptcy estate.

There are three types of assets in bankruptcy:

  • Personal property. This is what’s considered material goods; examples include clothing, furniture, artwork and vehicles.
  • Real property. Real property includes land and improvements or buildings tied to land, such as a house or barn.
  • Intangible property. As their name suggests, intangible assets include property that isn’t physically material but has value. For example, child support, alimony and retirement savings are intangible property.

Exempt and nonexempt assets

Some assets are exempt from bankruptcy proceedings. Federal exemptions exclude certain assets from liquidating, and many states have unique exemptions. These exemptions can include clothing, tools needed for work or health-related purposes and other assets.

As a part of the liquidation process, a court-appointed trustee is assigned to a bankruptcy estate to gather and oversee the debtor’s nonexempt assets. Nonexempt assets aren’t protected under the Bankruptcy Code and are sold for cash. The cash is then redistributed to creditors.

Do I have to list everything?

When listing assets in bankruptcy, debtors must file a full record of all asset types they own. As part of the bankruptcy filing procedure, debtors must provide the court with a list of their assets, also known as a schedule of assets.

Secured and unsecured assets must be reported when filing a schedule of assets. Examples of assets in bankruptcy filings include:

  • Business-related property
  • Financial assets (e.g., investments or deposit accounts)
  • Land or a primary or secondary home
  • Personal and household items
  • Property related to farming and commercial fishing
  • Vehicles
  • Any other property otherwise not stated

If a debtor claims any of the listed assets as exempt, they need to file a separate schedule listing the assets for exemption.

The court relies on the debtor to file a complete schedule of assets so the trustee can administer and liquidate the estate as needed. Only assets owned by the debtor at the time of filing are included in the bankruptcy estate and considered for liquidation.

What happens if you don’t list all of your assets?

When you sign your bankruptcy petition, you attest under penalty of perjury that the information and assets you’ve put forth are complete and true.

Those who hide or deliberately fail to report assets from the bankruptcy case risk having their bankruptcy discharge petition denied or revoked. Additionally, omitting assets — whether accidentally or intentionally — could be considered bankruptcy fraud, a criminal charge. If found guilty of perjury, the penalty is up to $250,000 in fines, up to 20 years in prison, or both.

What is a no-asset bankruptcy case?

In a no-asset bankruptcy case, an estate doesn’t have nonexempt assets that can be liquidated. According to the Administrative Office of the U.S. Courts, most Chapter 7 bankruptcy petitions have this designation.

In this situation, the trustee files a “no asset” report with the court. Since the estate doesn’t own unprotected assets that can be sold, unsecured creditors won’t receive distributions from the bankruptcy case.

Nonexempt assets the trustee later uncovers can still be recovered and sold from the bankruptcy estate. The debtor’s unsecured creditors are notified by the court and must file proofs of claim within a specified time frame to secure sale proceeds.

Key considerations

Debtors listing assets in bankruptcy should be aware of a few details that can affect the value of their estates and the assets they can claim as exempt:

  • Each state has a unique asset exemption list. States can enforce their list of exempt assets in addition to federally exempt assets.
  • State-exempt assets have a value limit. States also set limits on exempted assets up to a certain dollar amount. For example, jewelry is an exempt asset in California if the aggregate value is $8,725 or less.
  • Married couples can file individual or joint bankruptcy petitions. A debtor can file for bankruptcy individually or with their spouse. Regardless of how a debtor files, the non-filing spouse must also provide a list of their assets so the court can determine the scope of a household’s financial situation.
  • Secured debt can be reaffirmed. A debtor can choose to reaffirm secured debt for property such as a car or home. This means that under a written agreement with their secured creditor, the debtor promises to continue making payments and being liable for the debt. The reaffirmation agreement is then filed with the court, and the creditor agrees not to repossess the property as long as the debt account remains in good standing.

Next steps

When filing for bankruptcy, disclose all your assets, no matter how trivial you think they are. Err on the side of over-disclosure rather than trying to hide assets.

To complete the bankruptcy schedule forms, you’ll need details about each asset you own or have an interest in. This includes a description of assets, asset values and the value of the portion owned. If you need additional guidance about filing your schedule of assets, consult with a bankruptcy attorney to learn more about your state’s tax exemption laws.

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