The possibility of going through Chapter 7 bankruptcy might seem scary. You may fear that bankruptcy means you will have to sell off all of your personal possessions to pay off your debts. However, bankruptcy law actually allows you to keep certain belongings and assets even if you go through bankruptcy liquidation.
Bankruptcy law refers to assets you may keep as exempt assets. In a bankruptcy, a trustee will sell off your nonexempt assets to pay debts. However, if one of your assets is exempt, you may hold onto it.
Why bankruptcy exempts assets
As FindLaw explains, the idea behind bankruptcy law is to get people out from under the burden of massive debt. Bankruptcy should not leave a person destitute. Generally, assets that you will have to sell off in bankruptcy are expensive assets that you do not need for life necessities. These include things like a second home or a second vehicle, or investments like stocks and bonds.
Examples of exempt assets
The kinds of assets you can keep will depend on the requirements of federal and state law. Common examples of exempt assets generally include things you need for everyday living. These include clothing, furniture, automobiles, tools of your trade, and household appliances, though all of these should be of reasonable value. You may also keep assets like your pension, an amount of your house equity, or any damages you won from a personal injury case.
Federal and state exemption law
According to the U.S. Courts website, the Bankruptcy Code covers all states, but the code does contain a provision that allows states to create their own exemption standards. So what federal law says about bankruptcy exemptions may not always apply to the standards of Florida law. Asking a legal professional how bankruptcy exemptions work in Florida may be of benefit before filing for Chapter 7 bankruptcy.