For many people, filing for bankruptcy sounds like a worst case scenario where you lose everything you own and will be left homeless on the street with nothing but the clothes on your back. However, if you’re facing the prospect of bankruptcy and are scared of the consequences, don’t worry; it might not be as bad as you think.
Chapter 7 bankruptcy can be a great option for getting out from under your debts and getting a fresh financial start. It is true that Chapter 7 involves taking property and assets to sell them as payment for debts. After all, the idea is for the creditors to get some of their money back. But that doesn’t mean the debtor will be left completely high and dry. The law allows the filer certain exemptions; in other words, things that won’t be touched by the liquidation. For example:
- You might be able to keep your home from being liquidated, if it falls under the state and federal limits.
- You may be able to keep your car using the car exemption, but this also has limitations. For instance, the cap in 2010 was set at $3,225.
- You may be able to keep things like furniture, clothes, appliances and jewelry. Keep in mind, though, that each item will have a limit and there may be a total limit.
Property exemptions in a Chapter 7 bankruptcy can get extremely complicated, so it can be helpful to have an attorney by your side to make sure you take advantage of them all.