People who are in debt and can’t make the required payments on their bills will often wonder what they can do to get back on top of their finances. This is a scary place to be, but there’s an option that may help: Filing for bankruptcy.
When you file for bankruptcy, you’re asking the court to take control of your debts so you can have a fresh financial start. In a Chapter 7 bankruptcy, your non-exempt assets are liquidated to pay creditors. You don’t make payments to the court in this type of bankruptcy, so the creditors likely won’t get anything close to what they’re actually due.
Exempt vs non-exempt property: What to know
Exempt property includes anything that can’t be taken for liquidation by the bankruptcy court. Typically, this includes your primary home, but there might be a limit on the amount of equity you can keep. Public benefits, personal injury awards, and pensions are usually exempt. Some clothing and household furnishings, appliances, and similar items may also be exempt. There are value limits for what vehicles are exempt.
Non-exempt property can be claimed by the bankruptcy court. This includes second homes and vehicles, valuable collections, bank accounts, family heirlooms that hold value, and investment accounts. Even expensive musical instruments are non-exempt unless you’re a professional musician.
Keep in mind, however, that the vast majority of people who file for bankruptcy don’t have any real assets that the court is interested in seizing and selling. It’s still something you want to discuss with your legal counsel, but it isn’t something you probably have to be overly concerned about.
Filing for bankruptcy is a way that you can take control of your finances. You should understand exactly how your filing is going to impact your future and have experienced representation from the start.