As a Waco Bankruptcy Lawyer and Killeen Bankruptcy Lawyer I am frequently asked this question. When you file a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case, you must fill out bankruptcy forms called “bankruptcy schedules” which you sign under the penalty of perjury. Those forms ask you to list all of your property. You then get to claim that property as exempt under either federal or state law. In a Chapter 7 bankruptcy case, you get to keep all of your exempt property. As an experienced Central Texas Bankruptcy Attorney, I can typically allow you to file a Chapter 7 bankruptcy case, exempt all of your assets and discharge your debts.
What if you have non-exempt property? Again, all property must be listed on the bankruptcy schedules or you have committed perjury. Non-exempt property is either abandoned by the Chapter 7 Trustee (if it is burdensome or of inconsequential value) or sold by the Chapter 7 Trustee to pay your creditors. Additionally, individuals with non-exempt property can file a Chapter 13 bankruptcy case and keep all of their exempt and non-exempt property as long as they pay their creditors the value of their non-exempt property. Again, if you are looking to file a Chapter 7 or Chapter 13 bankruptcy case in Central Texas, please contact my firm for a free consultation to discuss these options.
Additionally, if a creditor sues and obtains a judgement against you, the non-exempt assets that you own can be sold to pay that creditor. However, under bankruptcy law and state property exemptions laws, you are allowed to exempt a certain amount of your property even if you have a judgment creditor. The rationale behind this is that we, as a civilized society, do not want to leave judgment debtors completely destitute so that we allow them to retain a certain amount of property in order to support themselves and their families.
Each state has different exemption laws and some states, like Texas, allow individuals filing bankruptcy to pick either their states’ exemption laws or the federal bankruptcy exemption laws when filing either a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case, as long as they have lived in Texas for the two years immediately preceding the filing of their bankruptcy case.
When you are being sued, you need the advise of an experienced bankruptcy attorney to advise you. Remember, your creditors have an attorney, you need one too!