Benefits Of Chapter 7 Bankruptcy: What Can You Retain?
When filing for bankruptcy, it can be confusing when examining the benefits and drawbacks between the various Chapters and how each will affect your situation. However, when exploring the options for filing for Chapter 7 Bankruptcy, one of the most prevalent questions is which property you will be allowed to retain and which you should expect to have liquidated.
However, to answer this question, it is important to first discuss the process by which debt is eliminated during Chapter 7 Bankruptcy. When one files for bankruptcy, specifically chapter 7, a means test will be completed to evaluate the state of an individual’s financial situation and the options to proceed with bankruptcy. If an individual meets the requirements for eligibility for Chapter 7 Bankruptcy, a trustee will be assigned to the case. This trustee will be responsible for examining the assets and possessions of the person filing for bankruptcy and subsequently liquidating the non-exempt property to begin paying back the creditors to whom the debtor owes.
While the debtor should expect to turn over a large portion of their assets and possessions to the trustee for liquidation, the Federal and state regulations in Middletown, CT, provide a set of exemptions to allow for a truly clean slate free of disadvantages which may lead the debtor back into the same situation from which they are seeking relief. Again, however, it is essential to examine each situation on a case-by-case basis. This is because while you believe a specific item or piece of property falls into a particular category, the court or appointed trustee may not.
This is a situation in which hiring a bankruptcy attorney in your area can be of significant advantage to you throughout the process. With the experience and knowledge from past cases and completed bankruptcies, you will be able to get a clearer picture of what to expect when entering the process for yourself.
While you may have to part with assets or property which you would rather not have, the goal of a Chapter 7 Bankruptcy is to liquidate your assets in order to pay back at least a portion of the debt you owe to potential creditors. However, a common misconception is that you will be left with nothing and have to completely rebuild your life. This is not the case.
So What Property Is Exempt?
Assets that may be exempt generally fit into the category of possessions or property which are essential or functional in your life. For example, needs as opposed to wants. One of the most common concerns many folks have is the security of their home. While the entire home may not be exempt in certain situations, the debtor is typically allowed to keep a portion of their equity in the house. Additionally, trade tools and possessions required for one’s profession are generally exempt.
Additionally, the necessary furniture and appliances in the home can typically be kept, along with the essential clothes and jewelry, if the items do not exceed a certain price. Often, debtors will also be allowed to keep one vehicle if it is not considered extravagant or a luxury item. Remember, the courts aim to ensure the debtor will be able to continue to live or function in modern life, not strip them of their basic necessities. That being said, Chapter 7 Bankruptcy relies on liquidating assets to pay debts, so debtors will need to be prepared to part with a significant portion of their assets and possessions.
It can be challenging to part with such a significant portion of assets, but in the end, they are the ticket to a clean financial slate. One of the primary categories of non-exempt items are expensive collections of any kind or other frivolous assets like expensive instruments or vehicles. Unfortunately, this can even include family heirlooms in many situations.
While it may appear obvious, bankruptcy aims to pay down one’s debts, so bank accounts, cash, and other investments will be liquidated to contribute to the process. However, pensions are often not included in this category. And while on the topic of frivolity, any second or additional vehicles will likely be sold along with any additional or vacation properties one may own. While this may seem like a small list, it typically encompasses many, if not most, of one’s possessions and financial assets.
How To Know Which Property Will Be Exempt In Your Situation Specifically
Each case is unique, so the only reliable way to find out specific exemptions in your circumstances is consulting with a Chapter 7 Bankruptcy attorney in your area. Since the specifics of bankruptcy heavily rely on your jurisdiction and circumstances, finding an attorney with experience and knowledge in the local courts is paramount.
At Jefferson Hanna Law, we will guide you through every step of the way and ensure you understand the ramifications of your decisions before they are made. So, to get started on your journey to a financial fresh start, call our office in Middletown, CT, as soon as possible.
Call For More Consultation