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Why Nonexempt Property Is a Friend to Creditors Everywhere

Property can be a godsend for creditors when they’re dealing with cash-strapped debtors unable to keep pace with their payments. However, not all property is up for grabs when it comes to making those debts whole. In this blog post, we take a look at the two main types of property and why nonexempt is where it’s at!

1. Exempt vs. nonexempt property

When a debtor files for bankruptcy, they are required to list all of their assets and property. This property is then divided into two categories: exempt and nonexempt. Exempt property is a property that the debtor is allowed to keep, while the nonexempt property is a property that the debtor may have to give up.

When a debtor files for bankruptcy, their nonexempt property becomes part of the bankruptcy estate and is used to pay creditors. This can include everything from the debtor’s home and vehicles to jewelry and art. For creditors, the nonexempt property is an important source of payment because it can be sold to generate funds to pay off debts.

In addition, the nonexempt property can also be used as collateral for a loan. This means that if the debtor defaults on the loan, the creditor can seize the property and sell it to recoup losses. As a result, nonexempt property plays an important role in a creditor’s ability to get paid.

2. How exempt or nonexempt property is determined

Exempt and nonexempt property is determined by state law. Each state has its own list of exempt and nonexempt property, so it is important for creditors to check the laws in the state where the debtor resides.

If you’re wondering where to find information on what nonexempt property is in your state, the answer may vary depending on the state itself. In some cases, this information may be available online through the state’s website.

Alternatively, you may be able to find it in the state’s probate code or statutes. If you’re still having trouble locating this information, you can always contact the clerk of your local probate court for assistance.

Keep in mind, though, that each state has its own rules and regulations regarding what property is considered nonexempt, so it’s important to consult with a debt collection agency if you have specific questions about your situation.

3. Common examples of exempt and nonexempt property

Some common examples of the exempt and nonexempt property include:


–    Clothing

–    Furniture

–    Household items

–    Tools of the trade


–    Bank accounts

–    Cash

–    Investments

–    Real estate (other than the debtor’s primary residence)

Of course, these lists are hardly exhaustive. Again, you’ll want to check with the appropriate agency within your state for the full details.

4. What creditors can do with nonexempt assets

If a debtor has any nonexempt assets, the creditor may be able to seize these assets in order to satisfy the debt. In some cases, the creditor may be able to force the sale of the asset in order to get the money they are owed. However, it is important to note that not all states allow creditors to seize assets in bankruptcy.

When a creditor forces the sale of an asset in order to get the money they are owed, it is called a foreclosure. Foreclosures can have both positive and negative effects. One positive effect is that it allows the creditor to recoup at least some of their losses.

This is especially helpful if the debtor is unable to pay back the full amount owed. Another positive effect is that it allows the creditor to sell the asset and use the proceeds to pay off the debt. This can be beneficial to the debtor if the asset is worth more than the debt.

Finally, foreclosures can also help to discourage other debtors from defaulting on their loans. The negative effects of foreclosures include the fact that they can damage the debtor’s credit rating and make it difficult for them to obtain new loans in the future.

Foreclosures can also lead to a loss of equity for the debtor. In some cases, foreclosures can even lead to homelessness. That makes it a powerful deterrent to debtors defaulting on their obligations.

5. What happens if a debtor does not have any nonexempt assets?

If a debtor does not have any nonexempt assets, the creditor will not be able to collect on the debt. In this case, the debt will be discharged, which means that the debtor will no longer be liable for repaying the debt. This is a worst-case scenario if you are a creditor, which is why you should consider working with your debtor on payment plans and other approaches to debt collection before it gets that far.

We hope this closer look at nonexempt property and assets will give you more knowledge and confidence as you approach collecting on a debt. And if you need professional assistance, never hesitate to call or contact us online at Southwest Recovery Services. We have the knowledge, experience, and track record to get you paid quickly.

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