Bankruptcy can be a daunting prospect, but it is important to know that it doesn’t mean losing everything you own. In fact, there are several assets that individuals can retain when going through the bankruptcy process. So, what can you keep in bankruptcy? Let’s find out.
What can you keep in bankruptcy?
The answer to this question largely depends on the type of bankruptcy you file for. Typically, there are two common types of bankruptcy for individual debtors: Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy allows individuals to discharge most unsecured debts, such as credit card bills and medical expenses. However, in return, the bankruptcy trustee is authorized to liquidate certain non-exempt assets to help repay creditors. The good news is that many states offer exemptions that allow debtors to retain specific property. These exemptions often include necessary household items, some equity in a primary residence, retirement accounts, and tools of trade needed for employment.
Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, individuals create a repayment plan that lasts between three to five years, enabling them to gradually pay off their debts. Typically, individuals can keep all of their property in Chapter 13 as long as they can afford to make the proposed payments for the specified period.
Frequently Asked Questions
1. What happens to my home during bankruptcy?
If you file Chapter 7 bankruptcy and have substantial equity in your home, it might be sold to repay your debts. However, many states have homestead exemptions that protect a certain amount of equity.
2. Can I keep my car?
In most cases, you can keep your car if it falls within your state’s allowed exemption limits on motor vehicles.
3. Will I lose my job if I file for bankruptcy?
No, filing for bankruptcy cannot result in a job loss. It is illegal for employers to discriminate against employees due to their bankruptcy filing.
4. Can I keep my retirement savings?
Retirement savings, such as 401(k) plans and IRAs, are generally protected and can be kept in bankruptcy.
5. Can I keep personal belongings like furniture, clothing, and appliances?
Yes, necessary household items and personal belongings are typically exempt and can be retained in bankruptcy.
6. Will filing for bankruptcy affect my credit score?
Yes, bankruptcy will have a negative impact on your credit score. However, it is not the end of your financial life, and with responsible financial management, you can improve your credit over time.
7. Can I keep my bank account?
In most cases, you can keep your basic checking or savings account during bankruptcy, especially if the funds in the account are exempt.
8. Will I lose my investments in bankruptcy?
The treatment of investments depends on the type and value of the investment. Some investments may be protected, while others may be subject to liquidation.
9. Can I keep my business if I file for bankruptcy?
It depends on the type of bankruptcy filed and the specific circumstances of your business. In Chapter 7 bankruptcy, the business may be liquidated, while in Chapter 13, you can keep it and continue operating while repaying your debts.
10. What debts cannot be discharged in bankruptcy?
Certain debts, such as child support, alimony, student loans (in most cases), and recent taxes, cannot be discharged in bankruptcy.
11. Can I keep my life insurance policy?
Life insurance policies with a “cash value” may be subject to liquidation, but if it falls within your state’s allowed exemption amount, you can likely keep it.
12. Can I keep my leased property?
If you file bankruptcy, you have the option to either assume the lease or reject it. Assuming the lease allows you to keep the leased property as long as you continue making the necessary payments.
In conclusion, bankruptcy doesn’t mean leaving you with nothing. Both Chapter 7 and Chapter 13 bankruptcy provide options for individuals to retain certain assets while discharging their debts or creating a feasible repayment plan. Consulting with a bankruptcy attorney can help you navigate the process and make informed decisions to protect your assets while getting a fresh financial start.