Many people don’t really understand what happens when they enter into bankruptcy.
Entering into bankruptcy doesn’t mean you sign away all of your earthly possessions and give
up everything you own. It certainly doesn’t mean you’ll never have a chance to buy a home or
purchase a car. It’s actually quite the opposite. Filing for bankruptcy is a way to take care of
the past debts opening the door for you to get on track with your future plans much quicker than
if you spent years trying to deal with the debt on your own.
Depending on what state you live in, there are laws in place that protect certain assets
such as your home, your car, and other possessions. These laws specify what is exempt from
the reach of creditors or bankruptcy Trustees. What is and isn’t exempt from bankruptcy filings
varies from state to state. For instance, one state may provide an exemption for your home
entirely, regardless of its valuation, while other states may only provide a few thousand dollars
worth of exemption on the equity in your home.
In the last decade, the law has changed in regards to which state exemption laws a
person filing for bankruptcy would need. Congress closed a loop-hole which previously allowed
a person filing for bankruptcy to possibly cherry pick a state with more favorable exemptions
and file there. With this change in the law, one would still be able to move to a different state to
file a bankruptcy. However exemptions will be determined by the filers residency status two
years prior to the filing of the case.
This may sound confusing, but a good attorney will work hard to explain to you the
bankruptcy laws of your state and do their level best to ensure that your best interests (and
assets) are protected.
If you decide to file for bankruptcy, it is comforting to know that you have options, when it
comes to your most important assets. Making the right choice in choosing legal counsel is
crucial to making sure you get the best opportunity to discharge your debts without losing your
most treasured assets.