Bankruptcy is never a happy prospect. Although the process can resolve debts and provide protection from individual creditors, it is difficult to turn over a large amount of one's personal property to complete the process.
U.S. Bankruptcy Courts exist to handle bankruptcy proceedings, and there are different types of personal or institutional bankruptcy. A Chapter 7 liquidation involves turning certain property of an individual or business over to a bankruptcy trustee, but there are exemptions so some property may be retained.
Laws surrounding bankruptcy are aimed at getting a debtor back into financial health, so taking every asset runs against the goal of the process. Debtors are allowed to keep necessities of modern life so they can keep living and working. The specific definitions of this property may vary, but there are some basic principles.
A debtor in Chapter 7 bankruptcy will have to surrender anything of demonstrable value that is not a necessity or personal connection. Valuables such as coin collections, antiques, heirlooms and investment instruments will be part of the bankruptcy estate. This also often includes second vehicles or homes.
Exempt property that a debtor may keep often includes vehicles and jewelry up to a certain value, clothing, household goods and appliances that are necessary for modern life. Equity in an owned home, tools of a professional trade and public benefits are also often exempt.
Legal representation may assist in determining for a bankrupt person the demands of a bankruptcy court. An experienced lawyer will have a new perspective on a daunting process that can be a person's or institution's new beginning.
Source: FindLaw, "Exempt vs. Non-exempt Property Under Chapter 7," accessed Aug. 24, 2017