Which assets are protected from liquidation in Chapter 7?

• A. Exempt assets are protected from liquidation; non-exempt assets are liquidated.
• B. All assets are liquidated.
• C. Only intangible assets are liquidated.
• D. No assets are liquidated.

Answer: (A)

In Chapter 7 bankruptcy, certain property is protected by exemptions, so the debtor can keep those assets despite the liquidation process. The trustee sells non-exempt property to raise funds to repay creditors, while exempt property remains with the debtor up to the exemption limits set by state or federal law (often chosen by the debtor). This is why exempt assets are protected from liquidation, and non-exempt assets are liquidated.

Thus, the best statement is that exempt assets are protected from liquidation; non-exempt assets are liquidated. The other options aren’t correct because they imply either that everything is sold, only intangible assets are sold, or nothing is sold, which contradicts how exemptions and the liquidation process work in Chapter 7.