One of the most common concerns a person has when considering bankruptcy is the possibility of losing all of their property in the process. While this may happen regularly in movies and T.V. shows, bankruptcy is not intended to take everything away from debtors who choose to use it, and does not usually turn out this way.
For most people carrying personal debt, the law offers significant relief. It may not require them to give up much or any of their personal belongings but it might involve some liquidation of assets.
Chapter 13 bankruptcy requires a debtor with significant expendable income to complete a repayment plan over a period of time, but may not require sacrificing much of the debtor’s personal property. Chapter 7 bankruptcy, which is more widely available to debtors with smaller expendable income, does typically require forfeiture of assets, but also offers several key exemptions.
Most debtors who have concerns about retaining assets in bankruptcy only qualify for Chapter 7. While this process does require debtors to give up some property, careful planning often reveals opportunities to use the exemption process to retain important pieces of their estate.
Ideally, the bankruptcy process allows debtors with unsustainable debt to get back on solid financial footing. To this end, the law allows debtors to keep property up to a certain value, so that they can maintain necessities of living while shedding their financial obligations.
These typically apply to things like a personal home, transportation and property that enables employment. It is always wise to prepare for any bankruptcy carefully, to make sure that it keeps the rights of the debtor protected and makes the most of all available exemptions.
Typical exempt property
The law aims to leave debtors with the tools and resources they need to work and get back on their feet, and the guidelines around exempt property reflect this clearly. Depending on the value of the property, debtors may typically exempt property like:
- Home equity, to a certain value
- Household items and furnishings
- Household appliances
- Professional tools
- Damages awarded from a personal injury claim
- A personal home
Property that does not fall into an exemption category may be subject to liquidation, so it is important to consider every qualifying guideline carefully during bankruptcy preparation.
Protecting yourself with a strong strategy
If you are considering a bankruptcy, it is good to approach the process with a well-designed legal strategy. The law tends to favor the needs and rights of the debtor, when bankruptcy is used properly. Be sure to use all the legal tools and guidance that you have available to keep your rights secure and ensure that you make the most of your bankruptcy to get you back on a strong financial trajectory.