Nobody is ever truly prepared for financial difficulties. Often, filing for bankruptcy might be the right solution for you to get a fresh start. However, many people might think that filing for bankruptcy means losing everything they own. That is not true.
Bankruptcy law provides debtors with legal exemptions that protect certain assets from being liquidated, which means you can keep certain assets if you file for bankruptcy under Chapter 7. The Oakland Chapter 7 bankruptcy lawyer at the Law Offices of Melanie Tavare can evaluate your unique situation and help you understand which assets you will be able to keep after filing for bankruptcy.
Bankruptcy exemptions refer to the assets that debtors can protect from being sold to repay creditors. Exemptions can be in the form of property, cash, or other asset types. Bankruptcy exemptions are a legal way to allow people struggling with debt to have a fresh start by retaining some of their assets. The scope and type of bankruptcy exemptions depend on the state and bankruptcy chapter.
Exemptions work differently depending on the type of bankruptcy chapter filed. In Chapter 7 bankruptcy, exemptions can protect the debtor’s assets from being liquidated to pay off creditors fully. However, in Chapter 13 bankruptcy, exemptions determine the amount of debts to be paid to creditors. The debtor will pay the value of their non-exempt assets for up to five years under a court-approved plan.
The federal government and states set Chapter 7 bankruptcy exemptions. However, certain states allow debtors to choose between the state or the federal exemption system. Below are the assets protected in Chapter 7 bankruptcy:
Bankruptcy law allows debtors to protect their homes, condos, mobile homes, or burial plots up to a specified amount. The protected value depends on where the property is located and the state law. The homestead exemption in California increased from $600,000 in 2021 to $678,378 in 2023 (Cal. Code Civ. Proc. § 704.730).
Chapter 7 bankruptcy allows debtors to keep one or more cars or trucks up to a specific value. The motor vehicle exemption in California allows you to protect up to $3,525 in equity in your vehicle.
This includes items such as clothing, furniture, appliances, dishes, and pets worth up to a certain amount.
Chapter 7 also allows debtors to protect some of their earned income and benefits from being used to pay creditors. Unemployment benefits, social security benefits, and alimony are often protected.
Retirement accounts like 401k or IRA are protected in Chapter 7 bankruptcy filings.
Some states or the federal government provide debtors with additional exemptions to protect their assets. Wildcard exemptions, as the name suggests, allow debtors to choose which other assets get exempted from liquidation. With the wildcard exemption in California, you can protect up to $23,250 in any asset of your choice.
Filing for Chapter 7 bankruptcy does not mean losing everything you own. Bankruptcy exemptions protect certain assets, not to mention that you may also be able to use a wildcard exemption.
If you want to file for bankruptcy to get a fresh financial start, you need to know which assets you can keep and which assets you are likely to lose after filing for bankruptcy. Set up a case evaluation with our bankruptcy lawyer at the Law Offices of Melanie Tavare to discuss your unique situation. Call 510-255-4646.
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