Once you’ve gotten in over your head with debt and decided it’s time to file for bankruptcy, you then will have to determine which debt-protection plan you will enter. For individuals they often chose Chapter 13 or Chapter 7, but before choosing the later they want to know which assets their bankruptcy attorney will liquidate.
Under Chapter 7, the debtor will be required to sell off assets of value in order to pay off creditors. After these assets are sold, a bankruptcy judge will typically dismiss the remainder of your debt balances, but most people want to know what assets they will have to sell off.
A number of assets are exempt from liquidation such as a primary residence or primary vehicle. However each state has different rules for exempt property so most people need to consult with a bankruptcy lawyer in their state in order to determine what is exempt.
Second homes or vehicles, valuable furnishings, jewelry and other property, even retirement accounts, can be liquidated. The value of your property is the determining factor of whether it should be sold.
For instance, if you have a secondary vehicle which is valued at $20,000 but the you owe $19,750 it is likely that a bankruptcy trustee won’t bother selling it off for a meager $250. But if you have a primary vehicle that is worth more than is owed on it, your trustee may sell it and tell you to use your secondary vehicle. This would also apply to a second home.
Bankruptcy liquidation is a complex process so it takes someone with expertise to help you through it. A bankruptcy attorney will know which plan is best for you and can determine if you have enough value in your assets to go through a debt relief plan that requires liquidation.