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Does non-exempt property matter in a Chapter 13 case?

You know that non-exempt property matters a lot in a Chapter 7 bankruptcy case. After all, that is a liquidation case, so that property may be sold off to pay the debt. Exempt property is what you get to keep.

But what about a Chapter 13 case? With this type of filing, you're just making up a repayment plan. Nothing is being liquidated. You're still going to pay what you owe, but you're just going to get a new plan to do it over the next three to five years. Does it still matter which assets are exempt and which are not?

It does. The non-exempt property plays a big role because the value of it is the minimum amount that can be included when you put in your proposed repayment plan.

For example, perhaps you have $100,000 in assets, but half of that is exempt property. The value of your non-exempt property is $50,000. If you put in a repayment proposal that says you'll pay back $40,000 over three years, it doesn't meet that baseline. It's not going to be accepted. It has to at least say that you'll pay off the $50,000. That's the minimum that has to be satisfied.

Of course, every case is different, and these numbers are just used to illustrate the broad way in which this works. However, it still shows you why it's very important to understand the legal process, how your property is going to be classified and what requirements you'll need to meet. The more you know about all of this, the easier the process will be.

Source: FindLaw, "Exempt Property in a Chapter 13 Bankruptcy," accessed June 23, 2017

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