If you are considering declaring bankruptcy - or have already done so - you are probably curious about what you get to keep as a result of the process. After all, the most common image of bankruptcy is a person or family who is literally left with nothing - practically living in the streets.
Fortunately, laws in most places are not nearly that draconian. The simple fact is, you CAN declare bankruptcy but remain in possession of many or most of your smaller or midsize assets.
In bankruptcy lingo, the assets that you are able to keep after declaring Chapter 7 or Chapter 13 bankruptcy are called exemptions.
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Of course, bankruptcy exemption laws vary by state, so you need to check with your specific state to determine which the specific of the exemption laws there. And, notably,15 states plus Washington D.C. actually allow the person declaring bankruptcy to choose between federal and state bankruptcy laws.
If you are wondering, "What do you get to keep after bankruptcy?", here are the answers to 5 frequently-asked-questions (FAQs):
1. What is a bankruptcy exemption?
A: Of course, when a person goes through bankruptcy, many assets above a certain value must be sold to pay off creditors. However, several types of items - usually with maximum value thresholds that vary on a per-item-type basis - can be kept by the family who has been through bankruptcy proceedings.
2. Will my house be safe?
A: Yes, you are able to save your house in almost all cases. However, if you want to remain in your home, you will need to keep up your payments just as before.
3. What about my car?
A: Similarly, a car is almost always on the exemption list, provided that it worth less than a certain amount. For example, you cannot keep your $200,000 Porsche after filing for bankruptcy. Similar to with wanting to keep a house, in order to keep your car you will need to continue to make your car payments.
4. Can I keep the stuff in my home?
A: Almost all or all of the items in your home should be safe from being confiscated. Family heirlooms and the like, as well as low-value items, should all be safe.
5. How about the money in my retirement accounts?
A: In addition, monies in a retirement account and educational savings accounts should likely be considered exempt in your state.
Consult with a state or federal bankruptcy attorney to find out which types of items you would be able to keep once your proceedings are complete.
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