When you file for bankruptcy, you might be under the misconception that you lose all of your property and belongings, but this isn't the case. In both chapter 7 and chapter 13 bankruptcy, there are exemptions. These exemptions include certain types of personal property that you can retain ownership of, even after filing for bankruptcy.
Here is more information about the exemptions for chapter 7 and chapter 13 bankruptcy:
What are exemptions?
During the bankruptcy filing proceedings, you will be informed of the property you may lose by filing. However, you will also be informed of property you can keep. The type of exemptions there are will depend on the type of bankruptcy you are filing.
The exemptions might be for the total piece of property you are in possession of, or a way to protect the value of an asset. There are also wildcard exemptions, which are applied to any property you own, of your choosing.
What are the chapter 7 exemptions?
The first type of exemptions occur when you file for chapter 7 bankruptcy. With this type of bankruptcy, you are paying your creditors after your trustee tries to sell of your assets. The exemptions are certain types of property that are considered exempt.
The amount of exemptions you are allowed will depend on your state and the details of your individual case. The system wants you to keep some of your equity so that you can start over after bankruptcy, such as some of the money in the bank, or the vehicles you own.
What are the chapter 13 exemptions?
If you are filing for chapter 13 bankruptcy, you are doing so to try and keep as much of your property as possible. Most people who file for chapter 13 do so to reorganize their debts, but retain as much of their assets and property as possible.
You must still pay the value of non-exempt assets to your unsecured creditors, such as credit card debt, with chapter 13 bankruptcy. This becomes the minimum amount you pay to creditors. Your exemptions actually help decrease your plan payments by lowering how much you are required to pay.
Why should you hire an attorney?
When talking about the chapter 7 and chapter 13 bankruptcy exemptions, it can get very confusing. If you are planning to file for bankruptcy, getting an attorney is highly recommended. They will be familiar with the state and federal laws, help you pinpoint your exemptions, and allow you to keep as much of your property as possible.