One of the common misconceptions about using bankruptcy to discharge debt is the notion that filing for bankruptcy means that one must offer up all of their property. While it is true that bankruptcy requires borrowers to make sacrifices in order to discharge debt, the aim of the bankruptcy is system is to give borrowers a fresh financial start, not leave them penniless and homeless.
If you suspect that bankruptcy may help you overcome significant debt, don't let the fear of liquidating your property keep you away from financial freedom. Borrowers with high incomes often qualify for Chapter 13 debt reorganization, which may not require forfeiting any property at all. Those who do not qualify for Chapter 13 may still qualify for Chapter 7, which does typically require borrowers to sacrifice their property, but rarely all of their property.
Exempting property during bankruptcy
Although Chapter 7 involves liquidating assets to pay off bad debts, some property remains protected. Protected property typically includes:
- Funds held in pensions
- Some or all of the equity in an owned home
- Social Security, public assistance benefits, or unemployment compensation
- Unpaid wages already earned
- Compensation from a personal injury suit
- A motor vehicle, below a certain value
- Some clothing
- Some household items and appliances
- Jewelry below a certain value
With careful planning, it is possible to protect these types of property during a Chapter 7 bankruptcy, or at least preserve some of them. No one should expect bankruptcy to be a painless, simple process, but building a strong legal strategy beforehand can help make it much more bearable.
Begin building tomorrow today
No matter what your reasons for considering bankruptcy, you have probably already considered other ways to pay off your debt or find some other form of financial relief. The offer that bankruptcy makes to those who qualify is a fresh start and the ability to clean the financial slate after experiencing hardship.
You may have more opportunities to protect your property than realize while using Chapter 7 to discharge your debt. Consider your legal options to keep your rights secure and to avoid missing potential protections for the exempt property that you should rightfully keep. Your circumstances in Medina may feel overwhelming in the moment, but your future holds many possibilities if you take action to overcome the difficulties directly in front of you.