Keeping Your Assets With A Chapter 7 Bankruptcy Filing
It's natural for Chapter 7 filers to be concerned about losing their assets. However, exemptions can protect a filer's assets from seizure. In Chapter 7 bankruptcy, exemptions play a crucial role in helping filers protect certain assets from liquidation. Exemptions are provisions in bankruptcy law that allow individuals to retain specific property or assets up to a certain value. Here's how exemptions work in Chapter 7 bankruptcy:
State or Federal Exemption Systems
Bankruptcy law provides two sets of exemption systems: state exemptions and federal exemptions. The filer must choose one system or the other, depending on the laws of their state. Some states allow filers to choose between state and federal exemptions, while others require the use of state-specific exemptions. Speak to a bankruptcy lawyer about the laws in your state.
Protecting Assets
Exemptions are designed to protect essential assets that individuals and families need to maintain a basic standard of living. Common examples of exempt assets can include a primary residence, a vehicle, clothing, household furnishings, tools of trade, retirement accounts, and certain public benefits like Social Security or unemployment benefits.
Exemption Amounts
Each exemption has a specific dollar limit, meaning the filer can protect up to a certain value of each asset. The exemption amounts vary depending on the exemption system chosen and can also vary by state. For example, a filer may be able to exempt up to a certain amount of equity in their home or a specific value of their vehicle.
Liquidation of Non-Exempt Assets
In Chapter 7 bankruptcy, a bankruptcy trustee is appointed to oversee the case. The trustee's role is to identify and liquidate non-exempt assets, meaning assets that are not protected by exemptions. The funds generated from the liquidation are used to repay creditors.
Asset Valuation
It's essential to determine the value of each asset accurately. In some cases, an independent appraisal may be necessary to establish the fair market value of certain assets, such as real estate or valuable personal property.
Protecting Exempt Assets
If a filer properly claims an exemption on an asset, it is generally protected from being liquidated. The filer retains ownership and possession of the exempt property, allowing them to keep it even after bankruptcy.
It's important to note that bankruptcy exemptions can be complex, and their application can vary depending on the specific circumstances. Seek advice from a bankruptcy attorney who is knowledgeable about the exemption laws in your state.