If the fear of losing assets is preventing you from filing for Chapter 7 bankruptcy while keeping you drowning in debt, it may be time to reconsider the facts. Many people avoid filing for bankruptcy due to the common misconception that it will automatically lead to them lose most of their belongings, but this can be a mistake.
While some bankruptcies can result in the repossession of assets, this is not always the case. Even when individuals file for Chapter 7 and end up having to give up some of their belongings that have too much value, there is usually a reasonable amount of exemptions that they can keep.
State Exemptions
According to the United States Bankruptcy Code, states may adopt their own exemption laws concerning how much residents may keep during a personal bankruptcy. As a result, many states have done just that. When an individual files for Chapter 7, he or she has the option to either follow state or federal exemptions. Usually, individual circumstances determine which set of exemptions is most favorable for a client’s unique situation.
Federal Exemptions
While many state exemptions are adjustments to federal ones, there can be advantages that federal exemptions offer that states do not. For example, while the state of Texas does have generous bankruptcy exemptions in many cases, there is no state-level wildcard exemption. As such, sometimes it makes more sense for Texans to opt for the federal route if they have property that they want to keep that falls outside of standard categories.
For those who are worried about losing all of their assets to bankruptcy, the good news is that there are exemption laws in place that can help them keep a reasonable amount of their belongings. Filing for bankruptcy is often not as scary as people think.
