Dealing with Non-Exempt Assets
If you are presently on the title to, or have an ownership interest in a non-exempt asset, you can sometimes plan for a bankruptcy by turning non-exempt assets into exempt ones. However, this area is fraught with potential issues, so you should consult an attorney before buying or selling anything if you are considering bankruptcy. Unless you sell the asset and put the money in the proper location (which will be discussed further), you would be subject to losing that asset or money. As such, it is very important that you sell the asset correctly, and if it has a title, that the title is transferred promptly to the new owner. This post describes the process of selling the non-exempt item in the correct manner (as well as what not to do), what to do with the money once you have sold this non-exempt asset, and what paper trace must occur in connection with the sale so that you do not lose the money.
There are two types of assets in a bankruptcy, exempt and non-exempt. Exempt asset include a house (with up to $150,000.00 in equity), a vehicle (with up to $6,000.00 in equity), and certain household goods and furnishings. There are many categories of exempt assets, and once you have consulted a bankruptcy attorney, you will be able to determine what non-exempt assets you have. Simply put, non-exempt assets are everything not specifically exempted by state or federal statutes. These items include, but are not limited to: a second vehicle for a single person or third vehicle for married debtors, off-road vehicles, water vehicles, jewelry (besides wedding/engagement rings), coins, stamps, a second residence or rental property, and vacant lots.
The best way to sell something is to use a service like Craigslist, Ebay, or a newspaper. This will generate a paper trail that shows the Trustee a genuine effort to sell the asset. If the item is sold for less than market value, it is important to show that an effort was made to sell the item at a higher price. When making a listing, be sure to save a copy of the listing in case you need to send it to the Trustee. There are also a few things to avoid when selling the item. It can’t be sold to relative or friend for an unreasonable price. If you have a concern about what is reasonable, contact an Arizona bankruptcy attorney for further guidance. There is no hard rule for reasonable, but for vehicles, the selling price should be as close to the Kelly Blue Book value as possible.
Once sale occurs, ensure title is transferred immediately, if the asset requires a title (vehicles, land). If the title has not been transferred by the time you file your petition, the Trustee is able to undo the sale and you will lose the asset. You need to make sure the buying party knows that they must file the appropriate document with the MVD or Recorder’s Office.
In order for the asset to be property transferred there cannot be any terms to the sale, rather, you must receive payment in full. If you are owed any money at the time of filing, that debt is transferred to the Trustee, and he will collect the money instead. Money you receive must deposited into a bank account. This creates a paper trail for the money. The Trustee can see the bill of sale, which lists the sale price. He will also see the same amount being deposited into your bank account.