When deciding to file for bankruptcy, many people choose to focus on the positive impact this debt relief option can have on their outstanding debts. Consequently, far too many people will fail to understand the impact that Chapter 7 bankruptcy can also have on their assets. As a result, some people may not enjoy the final outcome that they were hoping for. Taking the time to review the information outlined below can help you to avoid making this same mistake.
Under Chapter 7 bankruptcy laws, some of your assets will be protected by what is known as bankruptcy exemption or property exemption laws. These laws vary from state to state. There is also a set of exemption laws that apply on the federal level. However, only one set of exemption laws can be applied to each petition. Consequently, when filing for bankruptcy, you will be required to choose between the use of federal or state exemptions.
The purpose of property exemption laws is to allow you to maintain the assets you will need in order to remain self sufficient after your bankruptcy case is settled. Therefore, these laws will protect assets such as your home and primary vehicle.
In addition to being covered under property exemption laws, an asset must also meet the maximum value criteria assigned by the law. For instance, if the homestead exemption in your state protects equity in your home up to $50,000. This asset cannot be protected if it exceeds the maximum value allowed by law.
Any assets that are not protected by property exemption laws will be subject to seizure as part of your bankruptcy case. These seized assets will then be sold, and the proceeds will be used to pay as much of your debt as possible. This allows creditors to recover as much of their loss as they can before the remainder of your debt is discharged by the court.
If you attempt to sell or give away unprotected assets in preparation for your bankruptcy case, this behavior can be considered illegal and can result in the dismissal of your bankruptcy claim.
A Final Thought
Bankruptcy will impact each person's assets differently since no two people will have the exact same asset or debt structure. In order to learn more about how bankruptcy laws will impact your assets specifically, contact Thomas A Blake or a similar bankruptcy attorney.Share