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Which Items are Exempt from Liquidation in a Chapter 7 Bankruptcy Case?

There are two types of bankruptcy available to individuals facing high levels of consumer debt: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is also known as “liquidation bankruptcy” because it involves the liquidation of the filer’s assets in order to turn a profit to repay his or her creditors.

Not all of the filer’s assets are liquidated, though. Certain assets are exempt from liquidation, which means they cannot be sold to raise money to repay his or her creditors. Below are a few categories of assets that cannot be liquidated in a Chapter 7 bankruptcy case.

Items you Need for Work

The goal of liquidation is not to punish you; it is to turn any assets that are not critical to your survival into liquid cash to repay your creditors. If you need an item for work, it is considered to be critical to your survival. A few examples of items necessary for work include:

  • Your car;
  • Clothing you wear to work; and
  • Items used in your profession, such as your laptop.

Money Received as Compensation for a Personal Injury Claim

If you received compensation for your damages through a personal injury claim, your bankruptcy trustee cannot claim this money for your creditors. This is because the money you receive through such a claim is meant to cover your medical bills and other expenses caused directly by the injury.

Public Assistance

If you receive any form of public assistance, such as Temporary Assistance for Needy Families (TANF), this money cannot be taken from you to satisfy your debts. Money received through public assistance is not really an asset; it is a safety net to keep you from suffering physically due to your financial situation. Money gained through unemployment and Social Security compensation also cannot be taken to satisfy your debts.

Items You Need for Day-to-Day Life

Like the items you need for work, your bankruptcy trustee also cannot liquidate the items you need to conduct your day-to-day life. This category can be a bit more vague than the others. It includes household appliances and personal goods, within reason. Clothing, silverware, dishes, and personal care items like hairdryers are part of this category. Items you can live without, like video game systems and electronics, are not.


Your bankruptcy trustee cannot take the money in your pension account to repay your creditors. In contrast, the money in your investment and savings accounts can be used for this purpose.

Work with an Experienced La Crosse Bankruptcy Attorney

If you are facing a level of debt that you cannot eliminate on your own, get help by working with an experienced bankruptcy lawyer to learn more about the bankruptcy process. Our team at Moen Sheehan Meyer, Ltd. is here to help you educate yourself and make productive choices about your case. Contact us today to schedule your initial consultation with a member of our firm.

Published May 15, 2017
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