I wonder. Let's say that when it is all said and done, I have $30K in liquid assets, $50K in exempt assets, and $40K in non-dismissed debt. I would think that the non-dismissed debt would first get first dibs on the liquid assets, so there would be remaining the remaining $10K in non-dismissed debt. Would the BK judge force the debtor to relinquish $10K out of his $50K? If not, what force of law would allow the creditor to pay up? Could the judge stipulate that the creditor would need to restructure the debt a lower interest rate and over a longer period to make it as easy as possible for the debtor to eventually pay that off?
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Exemptions are just that: exempt. No one can touch them.
If you have non-exempt assets, you become an asset case, and the trustee takes all the assets and sells them. The trustee then distributes the money to your creditors.
If you have 10k in non-dischargable debt, like taxes or student loans, you will still be liable to pay that after bankruptcy. Taxes are a priority debt. Student loans are a non-priority unsecured debt but are not dischargeable.
So in your case, the trustee takes your 30k and applies it to all of your debts, what ever is left over is discharged unless it is a non-dischargable debt like taxes or student loans.
If you have more equity in your house than is allowed, or more equity in your car than is allowed, the trustee can sell those items as well and take anything left over after your exemptions and distribute it to your creditors.
Debt is not restructured in a chapter 7 but in some cases can be restructured in a chapter 13. Cars that have been owned for over 910 days and are under water can be restructured in a 13, and second mortgages can sometimes be stripped in a chapter 13.You can't take a picture of this. It's already gone. ~~Nate, Six Feet Under
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