Variance

• Exemptions from bankruptcy law are determined by both the federal government and the state government. At the federal level, nonexempt property examples are expensive musical instruments, cash, bank accounts, stocks, bonds, investments, valuable collections of stamps, coins and similar items as well as second vehicles and vacation homes. The federal government allows states to further specify nonexempt property or rule federal nonexempt property as exempt. This leads to variations from state to state.
  
  

Nonexempt by Default

• When property is not specified as exempt by state or federal bankruptcy law, it is labeled nonexempt by default. Nonexempt property must, however, have enough value to be advertised, stored and sold for a profit by the Chapter 7 bankruptcy trustee to actually be liquidated. If the sale of the property would not generate enough proceeds to pay down debt, the nonexempt property can be deemed abandoned back to the debtor and returned to the bankruptcy filer.
  
  

Partially Exempt and Nonexempt Property

• Some property types are exempt up to a certain value. Homestead exemptions vary from state to state. Texas places no value limitation on a homestead while Iowa declares 1/2 an acre in a city and 40 acres in a rural area exempt. Excess land would be deemed nonexempt. An automobile with over $3,225 in equity is nonexempt while family heirlooms and jewelry become nonexempt after their value is established at $1226 dollars or more. Your household items can be valued up to a total of $10,775 with a maximum value of $525 per item before pieces are declared nonexempt. Tools of the trade are exempt up to a value of $1850.
  
  

Partially Exempt and Nonexempt Property Payments

• When your property is liquidated because it was valued at over the maximum exemption amount, your trustee will issue you a payment for the maximum exemption attached to the property type sold. For example, if your home was liquidated in the state of Arizona and sold for $150,000 greater than the balance on your mortgage after closing costs and associated fees were subtracted, you would be paid $100,000 of the sale price because Arizona has a $100,000 equity limit.
  
  

Buy Backs

• In select instances where the cost of liquidating nonexempt pieces of your property would reduce the value to a point where selling the item would not prove profitable, your bankruptcy trustee can offer to let you buy back your own property from the bankrupt estate.