The Cassidy Law Firm Blog

Tuesday, April 29, 2014

Will I Lose Property If I File a Chapter 7 Bankruptcy in Monmouth?

In Monmouth County, most debtors are hesitant to consider bankruptcy as a solution to their debt problems because of the various misconceptions people have about the bankruptcy process and life after bankruptcy. If you are among the millions of people who have been struggling with debt in recent years, it may be time to clear up some of those misconceptions and start considering bankruptcy as a long-term solution. One of the biggest misconceptions people have about bankruptcy is that a debtor who files a chapter 7 bankruptcy in Monmouth will lose all of his or her assets during the bankruptcy. This is simply not true.

One of the reasons people are concerned about losing assets is that a chapter 7 bankruptcy is often referred to as a “liquidation” bankruptcy. The name can be misleading. Although the bankruptcy Trustee in a chapter 7 bankruptcy does have the authority and obligation to take possession of non-exempt assets and sell them to raise funds for the repayment of creditors, most chapter 7 debtors are able to protect most, if not all, assets by using the exemptions available to them.

In a chapter 7 bankruptcy a debtor is allowed to utilize either the federal or state exemptions to protect assets from seizure by the Trustee. Although bankruptcy is a federal matter, the individual states are allowed to create their own exemptions. States can then decide if a debtor must use the state exemptions or has the option to use the federal exemptions found in the U.S. Bankruptcy Code. In Monmouth, a debtor may choose to use the federal or state exemptions; however, they cannot be combined.

When an exemption is claimed the asset is protected and will remain the debtor’s property after the bankruptcy is discharged. For example, if you own a vehicle and you choose to  use the federal exemptions you may exempt up to $3,675 of equity in the vehicle. In addition, you could choose to use your “wildcard” exemption to exempt an additional $1,225 of equity in your vehicle. If the equity in your vehicle is not more than $4,900 you will be able to keep the vehicle when the bankruptcy is finished. Exemptions can also help you protect things such as your home, your pension, and your household furnishings.

If you have considerably more equity in your home, vehicle, or another important asset than what you can exempt you may wish to consider filing a chapter 13 instead of a chapter 7 bankruptcy. Consult with an experienced Monmouth bankruptcy attorney about specific issues and concerns.

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