Many people are afraid that in a personal bankruptcy, they will have to give up everything they own. Fortunately, this is not the case. Chapter 7 bankruptcy does require the debtor to surrender some assets, but there are many exemptions. These exemptions mean that after the process is complete, the person will still own their most important possessions.
Chapter 7 bankruptcy is a liquidation bankruptcy process, which means that during the bankruptcy process, assets must be sold to repay creditors. However, the U.S. Bankruptcy Code provides that some assets and property of the filing party may be held back and protected from the process. The policy behind this is to make sure that the person filing for bankruptcy protection has the resources they need as they carry on after a fresh financial start.
There are several categories of Chapter 7 bankruptcy exemptions that may be available to the filing party. For instance, the homestead exemption protects a certain amount of equity in the filing party’s home. Another important provision is a vehicle exemption, which may protect a certain amount of value in the filing party’s vehicle.
Personal property exemptions allow the person to keep many items with practical or sentimental value. These include exemptions for the types of items a person needs to maintain a home, and may include clothing, jewelry, home furnishings and appliances.
Another category of exemptions is known as the wild card exemption. This may protect property that is not included in one of the categories, or that is otherwise not available because the limit for the category has been exhausted.
The thought of personal bankruptcy may be intimidating or frightening, but continuing to live in debt can be much worse. Those who are struggling with debt can speak to a lawyer with experience in debt relief to learn more about their options.