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.
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.
