Asset

Asset summary:

• Assets are things that you own or have the right to own. 

• In bankruptcy, exempt assets are protected from creditors, while non-exempt assets are not.

• You must list all assets—both exempt and nonexempt—when you file for bankruptcy.

Asset definition and meaning

An asset is a thing that you own or have the right to own. Everything you have, regardless of value or location, is an asset and must be disclosed when you file for bankruptcy.

Key concept: 

An asset is anything you own or have the right to own, regardless of value.

More about assets

Some less-obvious items fall into the asset category. An asset could be anything you own,

• Whether it has value or not

• Whether you can see it or not

• Whether you're exercising your right to own it or not

It's probably pretty obvious that your car, savings, house, furniture, and electronics are assets. But so is money you lend to someone, the bonus from work you’ll receive in a couple of months, a potential settlement if you were personally injured, or the tax refund that you haven’t yet filed for. 

If you're the sole owner of a small business, your business is an asset. 

Asset: a comprehensive breakdown

When you file for bankruptcy, assets are important. To be fair to your creditors, bankruptcy law requires you to give up certain property that you own to offset as much of your debt as possible. You do that in Chapter 7 by turning them over to the court. The things you have to give up are called non-exempt assets. The assets are sold and the money is divided among your creditors. 

In Chapter 13, you don't surrender your assets, but the court will still examine your value. You have to pay at least as much into your bankruptcy plan as your creditors would receive if you had filed Chapter 7 and sold those assets. Assets matter even when you don't surrender them to the court in a Chapter 7. 

You don’t have to reveal or give up your assets when you resolve debts. 

Main types of assets

In a personal bankruptcy, there are four main types of assets: real property, personal property, intangible property, and business assets. Any of these could be exempt or non-exempt, depending on the bankruptcy law that applies to you. 

Real property. Real property (or real estate) is land that you own or anything connected to land, like a house. Some or all of the home equity in your primary home might be exempt depending on the state where you live. A manufactured home could be considered real property if it’s taxed as real estate and situated on a permanent foundation. If the home can be moved, it’s considered personal property. 

Personal property. This is your stuff, like clothing, furniture, tools, household appliances, and so on. This category includes valuables like art, jewelry, electronics, and luxury goods. Personal property that you need to maintain your household is generally exempt (like your pots and pans and your lawnmower). So are work tools that you need to earn income. Luxury goods are generally non-exempt. 

Intangible property. These are things you own that you can't physically touch, like your retirement account, money in savings, life insurance, tax refunds you haven’t received yet, and the money that your brother-in-law owes you. Your 401(k) retirement account is generally exempt. Much of your savings may be exempt as well. There are some exemption limits on individual retirement accounts (IRAs).

Business assets. If you own a business, you must list it and all of the assets your business owns. That includes supplies, licenses, equipment, inventory, leases, customer records, and contracts.