What Do I Need to Know About Bankruptcy Exemptions

What Do I Need to Know About Bankruptcy Exemptions

Share
What Do I Need to Know About Bankruptcy Exemptions

Background 

 

Individuals often avoid filing for bankruptcy because they fear that they will lose every possession that they own. However, many people do not realize that Federal and State bankruptcy exemption laws permit the majority of individuals who file for bankruptcy to keep most of their valuable personal belongings.


Exemptions
 

When individuals are forced to contemplate filing for bankruptcy, their first consideration is often whether or not they will be permitted to keep their home. Without a house to live in, of course, an individual's family will not have a safe and stable environment to return home to. A house provides people with security, stability, and protection. The thought of having that taken away is cause enough for severe anxiety and depression. Individuals who purchase a house often invest their entire life savings into the home, leaving them with diminished monetary funds.

 

The homestead exemption was developed in order to protect individuals who are struggling financially from losing their entire investment (i.e. the house). This bankruptcy exemption cannot protect a home from being foreclosed or sold, though.

 

Tools of Trade Exemption


Many individuals who are suffering from extensive financial debt and who should utilize the bankruptcy system refuse to consider filing for bankruptcy due to the negative ramifications that are often associated with this form of financial protection. They fear that they will be required to surrender all of their personal property to a trustee, who will then sell the items at an auction and use the profit to compensate lenders for a portion of the money that they lost.

 

However, if an individual loses all of their personal assets and essential resources, they will find it very difficult to begin a new life, especially when the cost of living is so expensive. Therefore, bankruptcy laws have been designed to protect a percentage of an individual's personal property.

 

One of the types of property that is protected under bankruptcy exemption laws is tools of trade, or items that an individual utilizes for work. The objects that this exemption may include varies a great deal. If an individual can prove that an item is essential to their job, they can protect that set under the tools of trade exemption. 

"Judgment Proof" Status


In general, an individual files for bankruptcy because they cannot afford to pay the debt that they have accrued. Truly, it is not difficult for someone to accumulate an unmanageable amount of debt, even if he/she is usually a responsible and cautious individual. This is especially true in today's economy. With increasing rates on unemployment, people are finding it difficult to make ends meet and they are struggling to pay their debts. Some people have fallen so far behind in their various installment payments that they are facing foreclosure or repossession.

Comments

comments

Share

Related Articles

Read previous post:
Consider the Effects of Bankruptcy on Homeowners Before Filing

Close