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How the Trustee Deals With Exemptions in Chapter 7 Discharge

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If you’ve filed for Chapter 7 bankruptcy and are wondering How the Trustee Deals with Exemptions in Chapter 7 Discharge will deal with your exemptions, there are a few ways. The trustee can sell assets for less than their fair market value, and then pay your unsecured creditors with the remainder. For example, if you owned a car with a secured loan, the trustee could sell that car for $10,000. Then, the trustee would pay the secured creditor the $4,000 exemption, and then distribute the remaining funds to unsecured creditors.

Why Need to Know About the Trustee Deals With Exemptions in Chapter 7 Discharge

The trustee must first determine whether or not the debtor’s property will be sold by the bankruptcy estate to pay creditors. In most cases, however, there are no assets that will be sold unless the value of the property exceeds the exemption. The trustee is motivated by the need to collect money for creditors, so the trustee might not pursue a property that is only marginally over its exemption.

The trustee must also carefully consider any non-exempt assets that the debtor claims as exempt. If they are over the exemption, the trustee may sell the property to pay off debts. If the value of the asset exceeds the exemption, the trustee must sell the property. In cases where the amount of equity exceeds the exemption, the trustee must sell the property if it is worthwhile to do so. However, a small amount of equity in a property may not be worth the trustee’s time and money.

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