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Non-exempt Property

Non-exempt Property

Non-exempt property is not protected in bankruptcy, and under certain circumstances the bankruptcy Trustee may gather and sell this property.  This is a bigger problem in Chapter 7 as opposed to Chapter 13.

The most common examples of Non-exempt property are:

  • Jet skis, fishing boats, four wheelers, campers and other “toys”
  • Motorcycle unless it’s the primary vehicle of debtor
  • Collectibles, such as stamps, coins, or NASCAR memorabilia
  • Family heirlooms
  • Non-homestead property, such as a rental unit
  • Cash in bank accounts, in your pockets, or stashed away in the house
  • Non-retirement investment accounts, stock certificates, savings bonds, and other investment property not contained within an ERISA-qualified retirement account.
  • Additional vehicles over one per Debtor
  • Part of your tax refund – for more on that issue click here.
  • A second or vacation home. Expensive musical instruments, unless the debtor is a professional musician
  • Expensive musical instruments, unless the debtor is a professional musician

When determining the value of property, it is the fair market value, not the replacement value, that is important.

The rule of thumb in Kansas is to estimate what the property would sell for in a private sale – through the paper, Craigslist, or at a garage sale.  This is somewhere between auction value and retail.

Will I lose my non-exempt property?

If a debtor in Chapter 7 bankruptcy has non-exempt property they want to keep and they can afford to buy back the non-exempt property from the Chapter 7 trustee, they can usually keep the property. The Chapter 7 Trustee has liquidation powers, which means they can ask a debtor to turn over the non-exempt property to be auctioned off. The problem with an auction is that it takes time and by its very nature is unpredictable. If the debtor wants to keep – for instance – a jet ski, the Chapter 7 Trustee will generally allow the debtor to make an offer to purchase the jet ski from the bankruptcy estate. The Chapter 7 Trustee usually will accept payments in lieu of a lump sum payment.

Non-exempt Property raises serious, potentially complex issues. If you have questions about non-exempt property or any other issue, please give us a call at 785-379-3600 for a FREE Consultation over the phone, in person or you can email us now.