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Perhaps what people fear the most about filing bankruptcy is everything that they are going to lose. The fear of being stripped of your possessions is a huge burden that can cause you extreme stress and anxiety. But, here’s some good news – most people do not lose everything. Exemptions are a part of both Chapter 7 and Chapter 13 bankruptcies. While the exemptions work differently under each chapter, many people are able to work within the law to keep the necessary resources to work and live. Let’s delve into each chapter and see how exemptions work.

Chapter 7

Many people inaccurately fear filing for Chapter 7 bankruptcy because they are under the assumption that they will lose everything. Legal code allows that certain assets can be protected from creditors. One of the goals of bankruptcy is to allow people to restart their financial state with a “clean slate.” In order to do this, people must generally have access to transportation to and from work and a place to live. If you own more than one car, one can be repossessed and sold to repay debt. However, many other types of personal property do not have enough value to be sold and applied to debt (e.g. furniture). In many cases, people who file for Chapter 7 will retain the majority of their assets.

Chapter 13

Under Chapter 13 bankruptcy, debt is restructured and consolidated based on income. Typically, a payment plan is developed to repay creditors over a 3-5 year time period. In most cases, if people honor the payment plan then assets are retained. For people to file Chapter 13, they will be required to prove that they will have enough income to manage monthly creditor payments plus their regular monthly expenses. Many people find that selling possessions on their own is a good way to create income and help their personal financial state.

If you are burdened by debt and face bankruptcy, contact George R. Belche today. We can walk you through the chapters of bankruptcy to determine what is best for your situation.

George R. Belche, Attorney at Law