What Property Can Be Liquidated in Chapter 7 Bankruptcy?

The purpose of bankruptcy is to decrease debt, which is one of the many reasons it doesn’t make sense to leave debtors completely destitute. By design, filing bankruptcy should allow the debtor to start over, rebuild a better financial footprint, and have a fresh start.

If bankruptcy only worked in the favor of debtors, however, there wouldn’t be an incentive for anyone to repay debts. That is why in bankruptcy there are non-exempt and exempt assets. In a Chapter 7 bankruptcy non-exempt assets are sold (liquidated) to repay creditors. What assets are exempt can be determined by state or federal law, which may depend on where you currently live or have lived in the last two and a half years.

There are a number of different types of valuables that can be sold off in a Chapter 7 bankruptcy by a trustee. Even then, there are exceptions to these rules and the potential for keeping some or all of your non-exempt assets. Every Chapter 7 bankruptcy case is different, so it is important to speak to an experienced bankruptcy lawyer about the specifics of your finances. 

Benefits of Chapter 7 Bankruptcy

If you are struggling to pay off debt and can’t get out of its grip, liquidation is one of many solutions that may give you financial freedom. So long as you meet all the requirements of a Chapter 7 bankruptcy, the trustee can use the proceeds from liquidated debts to pay off some or all of the debt you owe to certain creditors. Any remaining eligible debt is then discharged, with some exceptions. However, in many cases, all assets are exempt and the trustee does not liquidate anything. 

What is Non-Exempt Debt in Chapter 7?

Unless an asset is protected by exemptions at federal or state level, it is considered as non-exempt. This may include any income, property or possessions that the trustee can sell to pay back as much of the debt as possible. While there are assets that are usually considered non-exempt, each debtor will have their own unique list of assets that must be determined as exempt or non-exempt. 

Under Georgia law, you are allowed to exempt up to certain dollar amounts for different types of properties.  Some assets, such as funds held in a 401(k) account, are 100% exempt. Once all the value of non-exempt assets has been used to repay creditors, most remaining debt is discharged in a Chapter 7 bankruptcy. An experienced attorney can help you determine if your property is exempt.  If you have non-exempt property you wish to keep, a different chapter of bankruptcy such as a Chapter 13 may be a better option for you.

Chapter 7 Bankruptcy Exemptions

You have the right to retain part or full ownership of a limited amount of income, property and belongings when you file for Chapter 7 bankruptcy. Exemptions cannot be liquidated during bankruptcy and may include things like your car or your home, depending on the value of the property and whether the state exemption covers your equity in that property. 

Determining the value of Chapter 7 bankruptcy exemptions is complicated, so seek advice from a bankruptcy lawyer in Georgia today to help you decide if bankruptcy is the right choice in your circumstances. At H. Lehman Franklin P.C., our experienced lawyer can offer expert guidance tailored to your unique financial situation. Call our offices on 912-764-9616 or email at for a Chapter 7 bankruptcy consultation.