One of the factors to consider when learning about which bankruptcy process may be right for you and your family is the type of assets you possess and whether they are considered exempt or nonexempt under the law. Your California bankruptcy attorney can examine your assets and help you determine how to proceed.
Chapter 13 and Chapter 7: Which is Right for Your Situation?
The two primary ways of filing personal bankruptcy are Chapter 7 and Chapter 13. When people have regular income and substantial assets they would like to keep despite filing bankruptcy, they typically file Chapter 13 bankruptcy, since it often allows debtors to maintain their property and assets such as their homes – and the equity therein – throughout the process, which can take several years.
Chapter 7 bankruptcy, however, does not provide the same safeguard for debtors’ property, though it has other benefits, such as discharging unsecured debt. Instead, the bankruptcy trustee may sell off some nonexempt assets in order to pay down the debts.
For this reason, people who choose Chapter 7 proceedings typically do not own substantial property beyond what is necessary for day-to-day living. Chapter 7 filers generally do not have much income either, since a higher income level could require a person to file Chapter 13 instead.
Exempt and Nonexempt Assets
Chapter 7 bankruptcy is often referred to as a total liquidation of assets, since nonexempt assets are sold to reimburse creditors to whatever degree possible. When a debtor has no assets that are eligible to be liquidated though, the lenders often receive nothing and will simply have to take the loss. In contrast, this can make Chapter 7 proceedings quite attractive for debtors who do not have much to lose in terms of nonexempt assets.
The Role of Exemptions in Chapter 7 and Chapter 13 Bankruptcies
While property exemptions can be used to protect a debtor’s property from being sold to pay creditors in Chapter 7 bankruptcy proceedings, exemptions also play a role in Chapter 13 bankruptcies – by helping determine the type, amount and schedule of creditor repayment obligations.
Which Assets are Exempt?
In California, the law mandates that the state exemptions take precedent over the federal exemptions, and debtors are allowed to choose from two systems of exemptions, depending on the valuation limits allowed for different assets. A few exemptions have no monetary caps and are simply exempt outright.
Some of the exemptions allowed in California protect, up to a certain amount:
Consult an Experienced Personal Bankruptcy Attorney in Oakland
No matter your situation, your bankruptcy lawyer with the Law Office of Melanie Tavare in the Bay area can help you decide whether either Chapter 7 or Chapter 13 bankruptcy filing is right for you and, if so, which system of property exemptions would best protect your interests – and your property.
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