If you are struggling with your finances, you have probably thought more than once about seeking relief through bankruptcy. It is a difficult decision, especially if you know little about the process and are unsure of what to expect. In fact, the uncertainty of what happens during bankruptcy is one reason why so many postpone seeking the relief they need from their overwhelming debt.
One common concern about bankruptcy is what might happen to any assets you own if you should file for Chapter 7 or Chapter 13. This is a valid question and one to consider carefully. However, it may put your mind at ease to learn that the goal of the courts is not to leave you destitute but rather to help you take reasonable steps to make a fresh financial start.
What can I keep?
Imagining yourself with no home, car or belongings can be upsetting, especially when you are already struggling to make ends meet. If Chapter 13 is the route you decide to take, you will probably not have to worry about liquidation of your assets. If you qualify for Chapter 7, it is possible that the bankruptcy court will determine to liquidate some of your assets to repay your creditors. However, the following may give you some peace of mind:
- A portion of the equity in your home is exempt from bankruptcy.
- Up to $4,000 of the equity in your vehicle is also exempt.
- If you own tools you need for your livelihood, a portion of these is likely exempt from liquidation.
- Over $600 per person worth of household items, such as clothing, books and furnishings, can qualify for personal exemptions.
- Chapter 7 usually does not affect your alimony, child support, essential life insurance payments, Social Security or other similar benefits.
- Exemptions also exist for some of your jewelry, your retirement account and many court judgments in your favor, such as a personal injury award.
With these and other exemptions, you could be able to maintain a reasonable standard of living while achieving relief from many of your debts. What some people do not realize is that seeking relief from debt through bankruptcy is one of the rights guaranteed by the U.S. Constitution. It is not something about which you should feel any shame or avoid because of a perceived stigma, especially if your debts are causing you to suffer with sleepless nights, tension in your relationships or physical illness.