Exempt Assets For Bankruptcy
Thursday, January 31st, 2008 Subscribe To Our Feed
Many people assume that filing for bankruptcy will lead to them losing all their assets. This includes their home and car. It could even extend to all their personal belongings like furniture and clothing. This is not strictly true depending on the type of bankruptcy that you file for. Indeed, filing for bankruptcy is a way to mediate the debt that one person owes to another so that both parties are not wiped out by the bankruptcy. It is counterproductive to society to make someone homeless. It wants to encourage them to get back on a sound financial footing and be a contributing member of the community. This means that items that people need to live a productive life are generally exempt from bankruptcy. Even with changes to the bankruptcy laws in 2005 it is unlikely that personal items will be used to cover a debt. This article will cover exempt assets for bankruptcy in more depth.
In the United states, filing for bankruptcy is mandated by federal courts. Bankruptcy petitions are filed in Federal court in what is colloquially known as bankruptcy court. Through an attorney or in person, a person can file a petition in bankruptcy court that will seek protection from the court from creditors. If they file for chapter 7 then they are also applying for elimination of this debt.
The individual is obliged to fill out a number of forms detailing their financial well being. This includes the total amount of their assets. They will have to disclose their annual earnings and an itemized list of outstanding debts, including mortgage payments, car loans and credit card debt. Making false claims will land them in prison as it is a federal offense to make misleading claims on these forms.
Some details of chapter 7 bankruptcy exempted assets are :
Your home if you owe more than 80% of the value as a mortgage.
Your car if it is worth less than $2,000.
You are also allowed to keep $2,000 in cash when filing bankruptcy.
Any college funds that are raised for your children’s education are exempt from bankruptcy, provided they are in a college fund account.
Generally all pensions and IRA accounts are exempt from bankruptcy. There is usually a large fee associated with removing IRA funds as well as tax penalties; for this reason, these accounts are left intact and considered exempt from bankruptcy.
You will be required to give an estimate of the value of your personal possessions, like furniture, consumer appliances and collectible items. It is unlikely that anyone will inspect your home to validate these claims but it is worth noting that any false claims that are exposed can land you in jail or fined. Any assets that are not declared is a violation of federal bankruptcy law, even if you claim you did not know the true value of the items.
Declaring bankruptcy is are hard decision to make but in many cases it is unavoidable in order to get some control over your finances. Do not be put off taking this decision because you fear you will lose everything you own. This is not the case and the courts will accommodate both parties within the letters of the law.
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