Bankruptcy Good News! Because of bankruptcy exemptions you can usually keep all of your possessions after filing for bankruptcy!
April 4, 2012 Leave a comment
Most people are afraid to file bankruptcy because they wrongly believe that they will have to surrender some or all of their possessions once they go bankrupt. This is not true and has not been true for hundreds of years. You will usually not have to surrender any possessions after filing bankruptcy in the vast majority of cases. This is all because of the magic of bankruptcy exemptions and these exemptions have an interesting history.
When you file for bankruptcy a bankruptcy estate is automatically created which includes all of a debtor’s possessions. These possessions could be sold by a bankruptcy trustee if it were not for the magical exemptions. Exemptions allow debtors to take their property outside of the bankruptcy estate and keep it for themselves. A Trustee cannot touch any properly exempted property. This is what makes bankruptcy so attractive to you when your debt load gets excessively high.
Long ago it was true in England that a debtor had to give up all of his possessions to file for bankruptcy. This included literally the shirt on his back. In those days bankruptcy laws required a debtor to turn over all of his clothes to his creditors. This resulted in public breaches of the peace. A judge in old England responded with the very first bankruptcy exemption.
This was an exemption for the debtor’s one suit of clothes. It allowed the debtor to keep his clothes so he would not be forced to break the public nudity laws. Judges could simply not allow a situation where a person exercised their legal right to file for bankruptcy but in doing so were forced to break another law which was the law against public nudity.
That old decision started the ball rolling and bankruptcy exemptions have been expanding ever since. Cooking implements were added and then furniture. Homes were later included in exemptions so people could have a place to live and not forced to be homeless by bankruptcy. Vehicles were added so debtors could get to work as were tools of the trade, jewelry, as well as a few others. In addition to these exemptions at some point in America we added a blanket “wild card” exemption into which a debtor can fit property of any kind.
Currently this wild card exemption is over $23,000. In it you can protect cash, stocks, bonds, jewelry, collectibles, or any kind of property you see fit. This is a very generous exemption and it is why most people can keep most of their property in a bankruptcy. Most of my clients historically do not have assets in excess of this amount and therefore they can file bankruptcy and get rid of most of their debts and they can usually keep all of their assets.
So that is good news for you if you are considering filing for bankruptcy. Don’t worry about your property. Just contact a bankruptcy lawyer before you file to get your property properly exempted and you can move on debt free after your bankruptcy discharges.
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