As we're moving deeper into the New Year, an increasing number of people are getting ready to apply some of the new resolutions that they've set for 2015 such as tackling their financial woes. Personal bankruptcy is arguably the last resort for many indebted people, but it doesn't necessarily mean that it's the worst debt relief option. When considering filing for Chapter 7 bankruptcy, most people fear that they might lose all their assets. This article discusses the fate of your property when you apply for Chapter 7 bankruptcy.
Personal bankruptcy gives you instant relief
Perhaps the greatest benefit of Chapter 7 bankruptcy is immediate protection from creditors' harassment. Indeed from the moment that your petition is submitted, any business to which you owe money is forbidden from taking any legal action against your persona or even threatening you. The next step usually consists of the court's appointment of a trustee who will monitor the case. The end result of this legal process will be the cancellation of your outstanding debt, and the distribution of the proceeds collected from the liquidation of your assets.
What's going to happen to your assets?
As mentioned earlier, this question is the major source of concern for those who are considering filing for personal bankruptcy. Unlike what you might think, not every valuable asset gets liquidated in a Chapter 7 bankruptcy case. This means that if your most treasured property is the one that has the most value, then you might be able to still have it by the time the case is closed. If you speak to your chapter 7 bankruptcy attorney, you'll find out that each state sets exemptions to protect certain types of assets that bankruptcy filers own. For example, if your car is your primary means of transportation and the associated equity is below a state-determined level, then it won't be liquidated.
Your house is another type of asset that you might be able to keep. If you're a homeowner, there are essentially two situations that might apply to you:
Becoming a homeowner is a considerable social achievement. This is because it takes exceptional organization and years of mortgage payments to pay off the house's value. To protect those who spent their lifetime reimbursing mortgage debt and who are almost done, the U.S. legal system made it possible for such individuals to keep their house title, even after filing for Chapter 7 bankruptcy. The homestead exemption protects you from asset seizure and liquidation based on the level of equity that you have on your home. This exemption is very similar to the one that states fix to determine whether bankruptcy filers may keep their car or not.
What if your equity is very high?
If you're in this situation, then your lawyer will probably recommend that you file for another type of personal bankruptcy: Chapter 13. Under this section, you'll have the opportunity to repay your creditors by following a payment plan. While this might seem like a better option, you should keep in mind that the total balance must be fully repaid within a given period, usually ranging from 3 to 5 years. Before petitioning for this form of personal bankruptcy, your attorney will first try to see whether you have the financial means to make the required monthly payments. Failure to pay on time will result in the loss of your home title.
If you're considering filing for Chapter 7 bankruptcy, you should consult with a qualified attorney to have a clear understanding of what to expect, since there are rules and laws that you might be able to benefit from.
Share7 January 2015
Too many single people assume they don't need to plan their estate. My brother fell into this category, and his unexpected passing left our entire family struggling to deal with his home, belongings, and financial accounts. It took nearly three years for the courts to set up a deal because he left no paperwork detailing how he wanted his estate divided. The situation immediately convinced me to work on my own estate, even though I'm still in my early 30's and don't have children or a spouse to worry about. Since it's a little harder to pick beneficiaries and estate managers when you're single, I collected the resources I used for making my own decisions and decided to publish them here on my blog. Use these resources before talking to an estate planning attorney so you're prepared for making hard decisions.