There are many misconceptions out there about filing for bankruptcy. One of the most common misconceptions is that a bankruptcy court will sell all your assets to pay back your creditors.
Filing for bankruptcy should give you a fresh start, but this won’t mean much if all your assets are taken from you. Keep reading to learn which assets you can keep after filing for bankruptcy.
You can keep exempt assets during a Chapter 7 bankruptcy
Chapter 7 bankruptcy is also referred to as liquidation bankruptcy – where certain luxury items can be sold by the trustee to pay your debts. However, when you file for bankruptcy, you may be able to protect most of your assets from being sold. This is because a trustee cannot sell an exempted property – and the vast majority of people who qualify for Chapter 7 don’t have anything else.
Many assets are exempted from liquidation during a Chapter 7 bankruptcy. Some of the bankruptcy exemptions you can take advantage of include the following:
- Homestead exemption: If you file a Declaration of Homestead, you can get an exemption of up to $500,000 of equity in your home.
- Motor vehicle exemption: You may exempt up to $7,500 of your vehicle equity or $15,000 if you’re disabled or over 60 years of age.
When filing for Chapter 7 bankruptcy, you are also allowed to exempt many other items, including some personal jewelry and other things you may not expect.
You don’t have to liquidate assets during a Chapter 13 bankruptcy
When you file for Chapter 13 bankruptcy, you may be able to keep all or most of your property. You can also avoid foreclosure or repossession by spreading out any missed payments on secured debts over a three-to-five-year repayment plan. In addition, the automatic stay will prevent any creditors from harassing you or repossessing your property in the interim.
Deciding whether to file for bankruptcy or not and the right bankruptcy Chapter for your situation can be a stressful process. First, however, consider seeking legal guidance to ensure you keep as many personal assets as possible.