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Consumer Bankruptcy Tax Debt Relief Office in Greenbelt, MD

What assets can creditors take when you file for bankruptcy?

Filing for bankruptcy can be a stressful experience. When you file for bankruptcy, creditors may take some of your belongings to pay off your debts.

Knowing what creditors can and cannot take helps you prepare for the process. In bankruptcy, assets fall into two categories: exempt and non-exempt. Exempt assets are items you get to keep. Non-exempt assets are those that creditors can take.

Exempt assets

Exempt assets include items necessary for daily living. These typically cover a primary home, up to a certain value, known as a homestead exemption. Personal belongings like clothing, furniture and household goods often fall under exemptions. Most retirement accounts, such as 401(k)s and IRAs, are also safe. Additionally, tools of the trade, or items you need for work, usually qualify as exempt up to a certain value.

Non-exempt assets

Non-exempt assets are items that creditors can take. These often include second homes, vacation properties and valuable collections like art or jewelry. Luxury items and high-value electronics may also be at risk. Extra vehicles beyond the one you need for daily transportation can be non-exempt. Stocks, bonds and cash that do not fall under retirement savings might also have to go to pay debts.

Personal property and wages

Creditors may take non-essential personal property. This could include boats, recreational vehicles and expensive sports equipment. However, certain personal injury awards and compensation for lost wages often remain safe. Creditors can also take a portion of your wages. However, laws limit the amount they can garnish to ensure you still have enough to live on.

Understanding these rules and knowing what is at stake can help you navigate bankruptcy with more confidence and less worry.