When you file chapter 13 bankruptcy, you have the opportunity to keep your assets during a “reorganization” where you offer a fair payment to creditors in return for maintaining your property. Chapter 7 is a little different; while you may keep your assets if you have if they are low enough value to fit into the legal exemption laws provided for chapter 7 bankruptcy, the trustee may sell high-value assets that don’t fit within the exemptions to satisfy your creditors.
No matter what type of bankruptcy you file, bankruptcy law allows for exemptions (property that is protected from seizure). States differ in what the exemptions are, and if your state allows it, you may be able to claim the federal exemptions if they are more favorable to your situation.
Exempt does not mean you no longer have to pay for the asset. You will need to continue to make any mortgage or car loan payments if you wish to keep the collateral. The exemption rule applies to your ability to preserve a certain value of assets from liquidation by the trustee.
Bankruptcy was not intended to leave you homeless and broke. The law allows you to keep your possessions if they of reasonable value so you will not have to start over from scratch. Once your debt is eliminated, you will have more of your income to pay your living expenses and not be burdened by overwhelming debt.
If you have questions about exemptions and your assets in bankruptcy, contact a Folsom bankruptcy attorney to find out how you can get a fresh start.