Many myths surrounding bankruptcy can make people who need the protection think twice about filing their case. One of the areas that seems to be the source of a lot of untruths or misunderstandings is what type of property you can keep when you go through bankruptcy.
Anyone who is thinking of filing for bankruptcy should find out how it might impact their assets. This can be the key factor that helps them decide if they are going to move forward with the case.
What are exempt and non-exempt property?
Exempt property is any asset that won’t be taken by the bankruptcy court. Non-exempt property can be taken and liquidated to help pay off some of the filer’s debts. There are many factors that determine how various property is classified for this purpose.
Some assets, such as second homes or vehicles are non-exempt because they are considered extra. Damages from personal injury cases and pensions are exempt property. How long you have lived in Louisiana and the value of the assets you have can determine which one they fall under. Only individuals can have exempt property. When a business files for bankruptcy, full liquidation is necessary.
Does the type of bankruptcy affect an asset’s status?
The chapter of protection an individual seeks protection under can impact an asset’s status. There might be more assets classified as exempt under Chapter 13 because you are put on a payment plan to repay the creditors involved in your case. In a Chapter 7 bankruptcy, the trustee tries to recover as much money as possible since you won’t be making any payments. This means you will usually have to hand over all valuable property, including family heirlooms.
What else should a person consider about their assets before filing?
If you are making payments on property, such as a car or home, the type of bankruptcy you file makes a big difference. In a Chapter 7 case, you will have to return the property or purchase it at a wholesale price. During a Chapter 13, you can likely keep the property but you will have to ensure that all payments are made on time. The account will almost certainly have to be made current by the end of the bankruptcy.
Because of the complexities of bankruptcy law, it is best to find out how the law applies specifically to your case. This can give you the information you need to make a decision about how to get your fresh financial start.