When you declare bankruptcy under Chapter 7, the trustee takes over everything from your estate. The Bankruptcy Code requires that you give everything to the estate and then claim as exemptions back from the estate. All assets are not exempted by law but certain assets can be claimed as exempted under state’s exemptions. State of Nevada has a thorough list of exemptions, and we had extensively listed them on this blog. Please see the Nevada exemptions on this blog. The trustee generally would not take everything: they are interested in such items which can be easily liquidated and sold, so that they can distribute the property to the creditors. However, they don’t need problem property which they cannot easily sell.
In actual life and practice, over 95 percent of Chapter 7 filings are considered no-asset filings which in simple words means that that there are no-asset filings. In other words, they are non exempt assets with value left for unsecured creditors after the exempt assets have been claimed and the secured assets returned to the creditors. No-assets filings are often the result of careful planning by an experienced attorney well versed in bankruptcy laws. Here, one should omit going to a paralegal services because they are not familiar with exemptions and cannot work to benefit the debtors. A cheaper quotation on price from a paralegal or an attorney production service may cost you more money in the long run. Exempt assets are beyond the reach of your creditors and the bankruptcy trustee. These are state and federally protected areas and no one can touch them. For example, a homestead exemption generally gives your home a protected status and the mortgage lender cannot foreclose on this home or that part of the exempted home.
How you can keep your assets?
Let us say, if you exceed the value of exempted assets, and you still wish to keep non exempted assets, for example a car—you may under certain circumstances arrange to redeem it (buy back) for a price no greater than its current redemption value. Redemption value is the amount for which a retailer could sell the item, taking into consideration its age, and other relevant conditions.
You can also reaffirm a debt. By reaffirming a debt, you promise to pay the creditor and can keep the property. In this case, the remaining balance shall not be discharged. However, reaffirmation a debt is a serious financial decision. The law requires you to take certain steps to make sure the decision is in your best interest. If these . Again, you may rescind your reaffirmation agreement at any time before the bankruptcy court enters a discharge order, or before the expiration of the 60 days period. If a debtor reaffirms a debt, the creditor must inform the debtor as to the amount of debt reaffirmed, the applicable interest rates, when payments will begin, and filing requirements with the court. If you can, it is always a good idea to renegotiate the new lease, term of the contract to your advantage. If you want to retain items that are worth less than the secured debt against them, then either redemption or a chapter 13 reorganization may make more sense.
The Role of the bankruptcy Trustee.
After determining your exemptions, the bankruptcy trustee will assemble, liquidate and distribute the value of the unexempted property and distribute to your creditors This is a difficult part of the trustee’s job and they intend not to get into this unwelcome task. If there is no quick liquidation, they naturally are not interested. The trustee might just walk away or abandon property or simply return this property back to you. This also includes nonexempt assets with minimum resale value.
How the trustee will distribute your non exempted and confiscated assets?
– The first creditors to be paid are the secured creditors. This means the distribution to creditors the value of their collateral, or the collateral itself. So that means the banks will get back your home, if there is no equity, you can also keep it if there is no equity. Remember the Nevada homestead laws.
– The second line of receivers are the unsecured priority claims such as most taxes and past due delinquent amount of child support, alimony etc. If any funds are left, the trustee will distribute them to to your general unsecured creditors, such as credit card companies and hospitals on a pro rate basis.
– The trustee will also pay the administrative claims, such as his or her commission fees (ranging between 3 percent and 25 percent, depending on the value the trustee recovers) and the fees of professionals, such as lawyers and accountants.