Many people with financial issues delay filing for bankruptcy even if it would help. They may worry about the social stigma or that they will lose most of their personal property. The myth that people must give up or sell all of their possessions has a basis in reality, but it is an extreme exaggeration of the real bankruptcy process.
In a Chapter 7 bankruptcy, the person filing does need to provide the courts with information about their assets and income. The trustee overseeing their bankruptcy can ask them to liquidate or sell off certain assets to repay their creditors. However, not everything that you own is at risk. You can use exemptions to protect some of your property from liquidation in a Chapter 7 bankruptcy.
What exemptions can you use?
There are state and federal laws that provide financial exemptions for those filing for bankruptcy. Kentucky’s exemptions are not particularly generous, so practitioners typically use the federal exemptions to protect clients’ assets.
With the federal exemptions, You can protect up to $25,150 in home equity and $4,000 in vehicle equity. The personal property exemption is $13,400, and you can still protect your retirement account.
A couple of things to remember is that equity is not the value of your property but the difference between the value of the property and the amount of any liens on the vehicle. Also, married couples that own property together can double the amount of these exemptions.
Evaluating your assets is an important part of bankruptcy preparation
Many people look to see if they qualify under the means test for a Chapter 7 filing. They may not stop to look at the value of their personal property until later in the process. Talking with our bankruptcy attorney can help you evaluate whether filing a Chapter 7 bankruptcy is right for you.