The decision to file for bankruptcy may be fraught with many questions. Most people wonder what will become of their assets. During the bankruptcy process, assets are considered exempt and non-exempt. The category under which your belongings fall determines whether or not you can keep them.
The goal of bankruptcy is to eliminate the pressure of debt so that you can rebuild sustainable finances. Specific property exemptions may vary by state, but most state bankruptcy laws allow individuals to keep eight types of property.
You may keep your primary residence during bankruptcy though criteria for primary residency vary by state. Your home may be exempt up to a predetermined value after which mortgage payments may become necessary. Either way, the law intends to prevent homelessness.
An automobile is considered a primary form of transportation, and you may keep it under bankruptcy law. As with homes, an exemption threshold may apply.
- Income Necessities
Some personal property may be useful or mandatory to earn a living. You may keep computers, office furnishings, or any industry-specific equipment deemed essential to perform your jobs despite entering bankruptcy.
Your financial support may come from various sources, including a job, alimony, child support, a personal injury award, or federal benefits. You may keep your income, which you will need to rebuild your finances.
- Retirement Accounts
Most retirement accounts are protected from creditors and may remain open if you declare personal bankruptcy. Some funds are fully exempt, while others have protection up to a specific dollar amount.
Most states allow you to keep your wedding rings or other jewelry up to a predetermined value. If your state also offers an heirloom exemption, some of your jewelry may apply if it has been in your family for generations.
Your daily wardrobe is exempt from bankruptcy consideration. Accessories and jewelry up to a particular value may also fall under this category.
Some states offer what is known as a wildcard exemption. Under this rule, you may keep items from any category of your choosing, as long as they are within the allowable value limit.
After determining which assets you may keep during bankruptcy, you must forfeit the remainder to pay off creditors. Although a court-appointed trustee determines which non-exempt items will be used to do this, non-exempt property typically include second homes, non-retirement investment accounts, artwork, musical instruments, and other non-essential personal belongings.
Bankruptcy laws are complex and have various state and federal provisions that may apply to your circumstances. Consulting with a lawyer, like a bankruptcy lawyer from Darrell Castle and Associates, PLLC, can clarify your options.