If you're filing for Chapter 7 bankruptcy, you may already know that a lot of your personal property will be exempt from liquidation. This means that your bankruptcy proceedings will not leave you debt-free and possessionless. If bankruptcy works the right way, you should emerge from the proceedings with the essentials you require to live your life and do your job, while getting to keep various items that are essential to your life.
When reviewing what property is exempt and what property is not in this respect, keep the following three things in mind:
The value of any piece of property is not how much you paid for it when you originally bought it. The value is the current amount you can sell it for -- or the costs associated with replacing it.
If you have a vehicle, home or other property that exceeds the exemption amount in value, a bankruptcy trustee can sell it and provide you with the amount of money that was exempt while retaining any amount that exceeds the exemption.
Even if your car is exempt from bankruptcy liquidation, if you are late on your car payments, your creditor can still pursue the money owed on the car by taking cash from the liquidation of other, non-exempt property.
Bankruptcy exemptions are the best and most powerful tool available to Chapter 7 bankruptcy filers who want to keep the possessions that are most dear, useful and important to them. If you want to emerge from bankruptcy as unscathed as possible, make certain you fully explore all the exemptions available to you.
Source: United States Bankruptcy Court, "Exemptions (Property You Can Keep)," accessed April 06, 2018