When debt becomes too overwhelming, you may have to turn to a legal solution, such as bankruptcy, to get rid of it and get a fresh financial start. However, you may be reluctant to file for bankruptcy due to the fear of losing your car, your home, and other important assets. Yet, bankruptcy may be able to help you get rid of your debts without you having to lose anything at all.
Some people believe that bankruptcy will cause you to lose all the assets you own, but they are very wrong. The truth is that bankruptcy provides you with options to keep most, or even all, of your assets after obtaining a debt discharge. Here you will find the information you need to make the right legal decision.
Bankruptcy Exemptions
The law establishes "bankruptcy exemptions" to protect Americans seeking a fresh financial start through this legal option. Exemptions allow you to keep most of your most important assets when you file for bankruptcy. Therefore, you can get a debt discharge and move on with your life, without having to become a burden on the state.
Exemptions typically include assets such as a modest vehicle, clothing, furniture, kitchen utensils, tools, government benefits, your paycheck, some or all of the equity in your home, among other items. Exemption laws vary from state to state, so you should research local laws or consult with a bankruptcy attorney near you before proceeding with your filing.
Common Bankruptcy Exemptions
Motor Vehicle Exemption: In most states, you will be able to protect your car or truck from bankruptcy. These exemptions usually allow you to keep a vehicle up to a dollar amount.
Wage Exemption: In most states, you will be able to exempt up to 75% of your wages from bankruptcy. That means your creditors won't be able to garnish your entire paycheck. This varies depending on how much money you earn monthly.
Homestead Exemption: You can use this exemption to protect your home from creditors and the process itself. Again, it all depends on the equity you have in your home and its value. Each state sets a different dollar amount that you can exempt.
What About Non-Exempt Property?
Although the exemptions may cover most of your assets, some of them might not qualify for exemption. Non-exempt assets, depending on the type of bankruptcy you file, may be sold to pay your creditors.
Some common non-exempt assets include a secondary residence (such as a vacation house), expensive musical instruments, family heirlooms, collections of significant value, valuable art, jewelry, etc.
Furthermore, if your state allows you to exempt a vehicle up to $10,000, but your vehicle is valued at $20,000, your car may be sold during the bankruptcy process.
However, you may be able to protect most or all of your assets from the process. To accomplish this, you should speak with an Anaheim bankruptcy attorney. A trusted legal professional, such as KT Bankruptcy Lawyer, will be able to help you protect your most prized possessions and get the debt relief you need.
Consider The Type Of Bankruptcy You Will File
Another key factor in determining what will happen to your property after bankruptcy is the Chapter of bankruptcy you will file. There are two types of personal bankruptcy you can choose from, Chapter 7 bankruptcy and Chapter 13 bankruptcy. Both are very different and will affect your assets in distinct ways.
In Chapter 7 bankruptcy, a bankruptcy trustee will manage your non-exempt assets and sell them to pay your creditors. However, because of exemptions, the vast majority of Chapter 7 filers get to keep all of their assets. Therefore, you could get rid of your debts without having to sell anything at all.
On the other hand, in Chapter 13 bankruptcy you will have to reorganize your finances and create a payment plan to get rid of your debts after a period of time. In this case, as long as you comply with the repayment plan, you won't lose any of your assets, regardless of whether they are exempt or not. If you have assets that cannot be exempted and you have a significant monthly income, this may be your best option.
Hire A Professional To Help
If you have more questions, or if you want to know which bankruptcy chapter is best for your case, you should consult with an experienced local bankruptcy attorney. Most of these legal professionals offer free consultations, so don't hesitate to contact them to find the ideal attorney for your case.
