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How courts liquidate assets in bankruptcy

Those considering bankruptcy often worry about the financial fallout associated with the process. Though bankruptcy can help people get a new financial start in life, many people have concerns about what will happen to their cars, home and other high-value items if they file for Chapter 7 or Chapter 13 bankruptcy.

In order to pay back creditors, a bankruptcy court may sell the debtor’s non-exempt assets. Here is what happens when a court liquidates assets in a Texas bankruptcy case.

Listing assets

The first step in potentially liquidating assets is to have the debtor list their assets and how much they owe on each piece of property. The debtor also let the courts know about things such as their liabilities and yearly income. With this financial picture, the court can determine which assets are non-exempt and whether liquidation is necessary.

Those filing for bankruptcy can claim certain exemptions for their property. The state of Texas, for example, offers exemptions for:

  • A homestead up to a specific size
  • A single automobile per person in the household
  • Personal property worth up to $50,000 for a single filer or $100,000 for a family

These are just some of the potential exemptions. Many filers find that they do not lose any assets in bankruptcy.

Liquidating assets

If a debtor does not have any liquid cash to pay for their debts, the court may decide to liquidate some of a debtor’s non-exempt property. One of the more common ways to do this is by selling the items at an auction, where each item then goes to the highest bidder.

By knowing how each step of the bankruptcy process works, debtors can make better decisions for themselves and worry less about the whole ordeal.


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