Because Chapter 7 bankruptcy protects certain property from the bankruptcy process, it is important for individuals struggling with debt and considering bankruptcy options to understand what the exemptions are and how they work. Those seeking Chapter 7 bankruptcy protection are likely doing so because they are in a difficult position and may be worried about things like their family home or vehicle they use to get to work.
Fortunately, Chapter 7 bankruptcy exemptions can help by exempting some property, or a certain portion of the value of some categories of property, from the Chapter 7 bankruptcy process. The Chapter 7 bankruptcy process is not intended to punish the filing party or make them start from scratch which is why certain categories of property may be protected from the process. In general, it is important to begin by understanding the Chapter 7 bankruptcy is a liquidation bankruptcy option that allows the filing party to liquidate their assets to repay creditors.
Chapter 7 bankruptcy exemptions can protect a home, car and some personal property. The homestead exemption can protect some of the value of the filing party’s home. Because the homestead exemption can vary by state, and can also vary by state or federal law, it is important for the filing party to know what it is in their state. Additionally, a vehicle exemption can protect some of the value of the filing party’s car. Certain personal property is also protected. A wild card exemption may also be available to protect property that does not fall into one of the already protected categories or that has reached the limit allowed for the category.
While they may seem confusing to understand at times, Chapter 7 bankruptcy exemptions are there to protect individuals struggling with debt and seeking a fresh financial start. To help put their minds at ease, it helps to understand how the process works and when and how the protections come into play.