In today’s economy, many Americans file for bankruptcy as a way to get out of debt while protecting their assets. When bankruptcy was created, Congress wanted to make sure that the person filing for bankruptcy had a fresh start. With this in mind, they felt that the only way the debtor could really start over is if they weren’t wiped out by liquidation. This is where they came up with bankruptcy exemption laws. They wanted to allow debtors to preserve their generous amount of personal property by protecting it with bankruptcy exemption laws. The exemption laws vary from state to state and even the federal government has its own set of bankruptcy exemption laws that a person can use if they do not like state exemptions.
By filing for bankruptcy, a person will have a certain amount of property that they can keep and exempt from the bankruptcy estate. If a person filing for bankruptcy has more property than exemption laws protect, the property could be sold and the proceeds divided among creditors. Sometimes a debtor has something that only a part would be exempt from, they can ask the bankruptcy trustee to pay the difference so they can keep the property. This is seen with people who own cars properly and have no ties to them. They need your car, so they negotiate with the bankruptcy court to keep it. This generally happens in a Chapter 7 bankruptcy, because with a Chapter 13 bankruptcy there is a 3-5 year payment plan that allows the debtor to catch up on the money owed and keep their property.
While it is possible to apply on your own, due to the complexity of the exemption laws, it is best to hire a bankruptcy attorney who is experienced in this matter. There are many regulations that the average person who files for bankruptcy would not be aware of without the help of a bankruptcy attorney. For example, if a person moved out of state prior to filing for bankruptcy, until they have resided in the new state for two years, they will use the bankruptcy exemption laws of the state they left. This change came with the revision of the bankruptcy code in 2005. Congress did not want people to move to a state with more generous exemption laws just to apply.
Due to all the changes in the bankruptcy code, it is a good idea to consult a bankruptcy attorney about one’s financial situation. A bankruptcy attorney will have experience with the bankruptcy exemption laws for the individual’s state and will know what is expected of the local bankruptcy administrator. While Chapter 7 bankruptcy is known as a liquidation bankruptcy, rarely does someone who files for bankruptcy lose any property. In today’s economy, the bankruptcy trustee will weigh the cost of recovery against the performance of all properties that are not exempt. In many cases, it takes too much time and effort to get back just a few dollars.