Filing for bankruptcy can be a way to start over when debt has grown beyond what you can repay. However, bankruptcy is not without its drawbacks. Without fully understanding the consequences, there’s a chance you might lose a significant portion of your personal assets.
A Chapter 7 bankruptcy is a last resort when you do not have the means to repay your debts. If you qualify for Chapter 7, you can discharge unsecured debts such as credit card debts, medical bills and personal loans, and creditors will stop harassing you.
Examples of nonexempt assets
The court will ask you to declare every asset you own, your income and all your debts. Attempting to hide any assets will prevent you from discharging debts and may even result in criminal penalties.
The court will assign a trustee to your case, who will examine the accuracy of your claim and help you deal with creditors. They also shoulder the responsibility of repossessing certain assets of yours, also known as nonexempt assets, that can help repay creditors.
Nonexempt assets the trustee can sell to repay creditors include:
- Nonresidential homes or properties
- Valuable artwork, family heirlooms and collections
- Designer shoes, bags and clothing
- Expensive musical instruments, except if you need them for your work
- Secondary vehicles
- Stocks, bonds and other investments that are not in retirement accounts
- Jewelry with high resale value
Knowing this, some people may attempt to hide some of their assets from the trustee. However, if you are found concealing assets, you will not be able to discharge your debts and may also face criminal penalties.
The state recognizes that most Chapter 7 filers do not have nonexempt assets. When this occurs, the bankruptcy is considered a “no-asset case,” meaning that the debtor has no assets to distribute to the creditors.
It also understands that you need some properties to live and continue working. Indiana has bankruptcy exemptions, which allow you to protect some of your property from being taken. Generally, you should be able to keep your work tools, your everyday wardrobe, your retirement account and your primary car.
Before filing for bankruptcy, talking to an attorney may help you better understand how to proceed. Having legal representation might also increase your chances of converting nonexempt assets into exempt ones.
