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Is Bankruptcy Right for You? Know What to Expect

What Assets Are Exempt in Bankruptcy?

Silver Spring Bankruptcy Attorney Serving Frederick & Hagerstown

When considering which Chapter of bankruptcy is right for your family, you may be wondering how your property and personal possessions will be affected by filing. It is important to first understand the differences between the two main Chapters most commonly filed by consumers.

Chapter 7
This form of bankruptcy seeks to discharge the individual's debts through the liquidation of nonexempt assets. Before filing an individual must meet the qualifications of the means test, which is based off their income and the average income levels of the state in which they reside.

If they pass, they can file their petition and the court will appoint a bankruptcy trustee to their case. The trustee will gather all nonexempt assets for liquidation, and then distribute the funds amongst the creditors. Once this process is completed, the individual will be discharged of many of their remaining debts.

Chapter 13
The goal of this Chapter is to help the individual overcome their debt through a structured repayment plan over a three to five year period. This type of bankruptcy is often a fitting choice for those who do not wish to risk any of their possessions or those who do not qualify for Chapter 7.

After filing a petition for Chapter 13 protection, a court-appointed trustee will work with the debtor and their lawyer to create a more affordable monthly payment plan that will cover all their debts. Once the timeline of the repayment plan has been completed, the debtor is often released from most of the remaining balances of the debts.

Common Exemptions in Chapter 7

Chapter 7 is the only form of consumer bankruptcy that involves the liquidation of certain assets, and there are state and federal laws in place to protect the debtor from losing all of their assets in order to repay their creditors. In some cases, the debtor is able to complete the Chapter 7 process without having any assets liquidated.

Generally, the following assets are exempt from liquidation:

  • Personal properties such as food, furniture, clothing, jewelry, and more
  • Homestead (The debtor's home and land)
  • Household pets
  • Automobiles (If they qualify under the price level set by the bankruptcy code)
  • Most forms of income
  • Retirement accounts

If you have concerns as to which Chapter is best suited to help you achieve your financial goes, call The Law Office of David Cahn today for experienced legal counsel and knowledgeable advice.

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