While bankruptcy is an all-around protection for struggling consumers faced with overwhelming debt, bankruptcy exemptions provide an additional layer or protection for the filing party’s property. The way it works is that bankruptcy exemptions protect certain categories and amounts of property so those seeking bankruptcy protection should be familiar with what those property exemptions are.
Exempt property is generally considered property that is necessary for daily life and is associated with living and working. Chapter 7 bankruptcy protection is designed to help struggling consumers and not to make them start from scratch. It can help them get back on their feet and enjoy debt relief. That is why bankruptcy exemptions are available and can help the filing party protect their property subject to certain categories and limits. A wild card exemption may also be available so filing parties should know if that can apply to them.
Categories of property that may be exempt include a car up to a certain value; a certain amount of equity in the filing party’s home according to homestead exemption rules; reasonably necessary household goods and furnishings; household appliances; reasonably necessary clothing; jewelry up to a certain value; tools of the filing party’s trade; pensions; personal injury awards; and some other types of wage benefits and public assistance benefits as well. Before filing party Chapter 7 bankruptcy protection, the filing party should be familiar with these exemptions.
Bankruptcy exemptions are essential to understand because they play a critical role in the filing party’s bankruptcy process. The filing party can better plan and protect themselves when they know what to expect from the bankruptcy process which is designed as a resource to help them reach their goal of a fresh financial start.