Bankruptcy Property - What Can You Keep When You File?
One of the biggest questions people have about declaring bankruptcy is what happens to their personal property.
Bankruptcy property is treated differently depending on the type of bankruptcy filing and whether the assets are exempt.
Let's assume that you are filing Chapter 7 bankruptcy, since that is the most popular form of bankruptcy that consumers file in the United States.
With Chapter 7, you're aiming to have your debts discharged, which means that you will not have to pay back those obligations because they are completely wiped out by the bankruptcy court.
However, this type of bankruptcy is known as liquidation because you are required to sell nonexempt assets in order to cover the costs of your unpaid bills (or at least as much of the cost as you can).
For better or worse, most people who reached the point of choosing bankruptcy don't have a lot of valuable items hanging around.
The most important asset that people worry about is their home, and this is usually covered by some sort of exemption.
Most states have some level of homestead protection in order to keep creditors hands away from part or all of the equity in your home.
If your state's exemption is insufficient, you can claim the federal bankruptcy code exemption which is $18,450 (or $36,900 for joint owners).
Some states like Florida and Texas have unlimited homestead exemptions that protect your equity no matter how valuable your home is.
What about your automobiles? Well, most states have at least some exemption for a car or other motor vehicle, but you'll have to check with your lawyer for the details.
If you choose a federal exemption, you can claim $2950 in a vehicle.
So if the equity in your car is less than this amount, you get to keep your car.
If it is greater, than the trustee can sell your car but must pay you the amount of your exemption.
You may actually get to keep your car in this case if you are willing to pay the difference
Bankruptcy property is treated differently depending on the type of bankruptcy filing and whether the assets are exempt.
Let's assume that you are filing Chapter 7 bankruptcy, since that is the most popular form of bankruptcy that consumers file in the United States.
With Chapter 7, you're aiming to have your debts discharged, which means that you will not have to pay back those obligations because they are completely wiped out by the bankruptcy court.
However, this type of bankruptcy is known as liquidation because you are required to sell nonexempt assets in order to cover the costs of your unpaid bills (or at least as much of the cost as you can).
For better or worse, most people who reached the point of choosing bankruptcy don't have a lot of valuable items hanging around.
The most important asset that people worry about is their home, and this is usually covered by some sort of exemption.
Most states have some level of homestead protection in order to keep creditors hands away from part or all of the equity in your home.
If your state's exemption is insufficient, you can claim the federal bankruptcy code exemption which is $18,450 (or $36,900 for joint owners).
Some states like Florida and Texas have unlimited homestead exemptions that protect your equity no matter how valuable your home is.
What about your automobiles? Well, most states have at least some exemption for a car or other motor vehicle, but you'll have to check with your lawyer for the details.
If you choose a federal exemption, you can claim $2950 in a vehicle.
So if the equity in your car is less than this amount, you get to keep your car.
If it is greater, than the trustee can sell your car but must pay you the amount of your exemption.
You may actually get to keep your car in this case if you are willing to pay the difference
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