Filing for bankruptcy can be a fearful time, but it does not necessarily have to be. Individuals filing for bankruptcy relief may have concerns about their home, cars and personal property but it is important to understand that the bankruptcy process provides important protections for filers seeking debt relief. Chapter 7 bankruptcy is considered an asset liquidation bankruptcy that allows the filing party to liquidate assets to repay their debts. However, some assets are exempt from the process.
Chapter 7 bankruptcy provides a fresh financial start for filing parties through the ability to liquidate non-exempt assets to repay debts and any remaining debts are then discharged through the bankruptcy process. Certain categories, and types, of property, however, may be exempted from the liquidation process. There are both state and federal exemptions and it is important to be familiar with the exemptions in your state and the exemptions that can help you protect the assets you are seeking to protect.
There are several types of exemptions, including a homestead exemption which commonly protects a certain amount of equity in a family home. The amount that is protected can vary by state. In addition, car exemptions are available, but may be capped. There are also exemptions for personal property such as jewelry or other types of personal property. Depending on the state, wild card exemptions may also be available for property categories that do not enjoy protections or property types that exceed the allowable limit.
The bankruptcy process is intended to provide debt relief and peace of mind and not create anxiety. Because of this, it is important for individuals considering filing for bankruptcy to be familiar with the process and the protections in place to help them enjoy a fresh financial start but not start over entirely.
Source: Bankruptcy.findlaw.com, “Bankruptcy Exemptions: Chapter 7,” Accessed Oct. 4, 2016