Many people worry they will lose all their belongings if they file bankruptcy, or that they must be flat broke to file. When actually, bankruptcy can be a way for you to protect the assets you have. Bankruptcy exemptions determine what property you get to keep, and your assets won't be taken away without your consent.
Bankruptcy does not automatically give all your belongings to the creditors. Many state and federal laws protect your rights and include many exemptions such as your house, cars and personal belongings that you need to continue with a normal life after bankruptcy proceedings.
State or Federal Exemptions
Exemption amounts differ from state to state; also federal exemptions may be available in your state. If your state allows it, you may be able to choose the state exemptions or the federal exemptions. Each set of exemptions offers different advantages to work best for the property you want to keep. You must choose one or the other, and you will not be allowed to select different factors from each system.
If the property you want to keep is equal to or less than the exemption amount allowed in your state, you may keep your belongings. In Chapter 7 bankruptcy if your vehicle is worth more than the allowable exemption, the bankruptcy trustee can sell your car, pay off the loan and any creditors and pay you whatever the exemption rate is.
If your home is worth more than you owe on it, then that amount is considered equity. In a Chapter 7 bankruptcy, the trustee may be able to sell your house and use the proceeds to pay the creditors. The homestead exemption allows you to keep a certain amount of the equity and protect it from the trustee. In a Chapter 13 bankruptcy, you may keep your home and work out a plan to make past mortgage payments.
Laws to Protect You
There are laws in place to protect you during the bankruptcy process. It is essential to speak to a qualified Sacramento bankruptcy attorney to find out which of your assets are exempt and non-exempt so you can keep the assets that are the most important to you.