Don't Lose Your Stuff: What Bankruptcy Lets You Keep
A chapter 7 bankruptcy can be great for wiping out a lot of debt and allowing the filer to get a fresh financial start; however, there are some potentials issues with a loss of property. This type of bankruptcy allows the courts to seize certain pieces of property, sell them, and pay off some of your bankruptcy debts. There are rules that lend protection to some of your property, so read on to learn more.
Understanding Exemptions
The word exemption, in this case, means a dollar amount that can be deducted from the value of a given piece of property. The plus side of devaluing property is that the bankruptcy courts will have less interest in taking assets that are worth less. So, in this case, you want your home or car to be worth less money. Take a look at some common pieces of property and how exemptions work.
Homes: The exemption here is called a homestead exemption, and the amount you can deduct from your home's value depends on the state and if you are filing bankruptcy jointly or singly. It works like this: if your state allows you a $20,000 exemption, and your home is worth $100,000, your home's stated worth for chapter 7 filing would $80,000. If you owe money on your mortgage, that amount would further depreciate your home's value.
In most cases, filers end up being able to keep their homes when filing bankruptcy, particularly when you consider that most bankruptcy trustees won't seize a home worth a lot of money for a bankruptcy that is less than the value of the home.
Cars: The way the exemption for cars works is very much like it works for homes. In some states, this exemption is lumped into an exemption called "personal property". If you owe a lot on your car, it makes no sense for the bankruptcy trustee to take it. If it is fairly new and paid off, however, you might need to surrender it, depending on it's value and the amount of the exemption.
Personal property: Generally, this applies to household goods, clothing, tools, etc. In most cases, your used property is simply not worth as much to the bankruptcy court as it is to you. Used goods do not bring top dollar, and the trustee must sell these goods to make any money to pay your creditors.
Talk to your bankruptcy lawyer about exemptions and how to keep your property, and check exemptions in your state as well. For additional advice, contact a law firm that offers chapter 7 bankruptcy filing assistance.
