Bankruptcy: What do I get to keep?

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.