October 1, 2010

Chapter 7 Bankruptcy Exemptions

Posted in Bankruptcy tagged at 3:05 pm by demetriagraves

There are many clients that I work with who are considering filing for chapter 7 bankruptcy but are worried about losing all their assets and being left with nothing. This is a common misconception but because there are exemptions in bankruptcy law where many personal assets can’t be touched – you don’t have to worry about being taken to the cleaners.

The laws of chapter 7 bankruptcy are designed to help protect a debtor’s human rights. Before the existence of chapter 7 bankruptcy the laws and the court were more in favor of the lender or the creditor. The act of filing chapter 7 bankruptcy has given the creditors a bit of space to breathe and be comfortable. Filing chapter 7 bankruptcy means requesting the bankruptcy court to liquidate all the un-exempted assets and paying off the debts. This means most of the property of the applicant is at a risk of getting sold off. The best part of Filing chapter 7 bankruptcy is getting rid of the personal bankruptcy including medical bills and credit card debt.
The exemptions for chapter 7 bankruptcy include the following:
  • Homestead Exemption: The idea of this exemption is to prevent the debtor from becoming homeless. The rules of the personal bankruptcy code differ from state to state and some states do not have the Homestead Exemption. In most of the states there is provision to save the whole or part of one’s primary residence depending in your circumstances.
  • The cash value of the insurance is exempted from being attached to pay off the debt. The debtor is allowed to keep the cash value of the insurance policies.
  • The bankruptcy code protects the benefits of the retirement plans. This is to make sure that the citizens do not suffer in their old age.
  • The personal property such as furniture, household goods, furnishings, books, clothes (except furs), musical instruments, and appliances are exempted from being liquidated. The debtor can even keep jewelry worth not more than $1000. Some states include the vehicle in personal property that cannot be attached to get rid of the debt. The laws pertaining to this can vary from state to state.
  • The exemptions include the public benefits such as Social Security, welfare, and unemployment insurance.
  • The tools used for work purposes or for earning a living are also exempted. This depends on the profession or trade of the applicant and the laws of the state.
I offer a free initial confidential consultation where you can get all your questions answered concerning bankruptcy. Please don’t let common misconceptions get in the way of working out the best way for you to move forward and start off with a clean financial slate.
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