Bankruptcy takes away all your assets that you have worked long and hard to accumulate. Is that what you think? Then you must know that you are wrong. While it is important to disclose all of your assets to the court when faced with bankruptcy, the law allows you to protect some of them. The lawmakers understand that there are certain assets that should be shielded and not allowed to be lost. Regardless, of the size of the debt that you owe the law protects you from losing your house, vehicle or other personal belongings. Unlike liquidation process, in bankruptcy the creditors cannot place liens on your assets. Below are some tips that can be useful in an event of bankruptcy.
Tip 1 â€“ List Down Your Assets and Liabilities
Before you call any bankruptcy lawyer, list down your assets and liabilities on a paper. Listing down what you have and what you have to pay is going to give you a clear picture of your financial standing.
Tip 2 â€“ Arrange a Bankruptcy Lawyer
You cannot take the protection of law until you hire a bankruptcy lawyer who can guide you on the process. Each state has a different exemption limit. The extent of protection that you can take under bankruptcy varies from state to state. You will need to seek your attorney's advice regarding laws of your state.
Tip 3 â€“ Bankruptcy Under Chapter 7 and Chapter 13
Both Chapter 7 bankruptcy and Chapter 13 bankruptcy provide you a different protection. You will need to discuss with your attorney which option might be most suitable for you. Chapter 7 will give you the protection of exempt assets. An exempt asset is an asset that cannot be touched by a creditor. Under this exemption, the creditor who has lien over your property cannot seize your property or sell it. On the other hand, Chapter 13 bankruptcy offers rescheduling of your payments. The bankruptcy court allows you to file a repayment plan for paying off the debts instead of liquidating your assets.If the resale value of your car or house is less than the amount you owe then you are allowed to keep the property under Chapter 7. Most household goods are considered exempt assets as they have no resale value. In several cases it has been observed that bankruptcy filed under Chapter 7 is a case of no assets. In such cases, the debtor has usually taken an exemption on all of his assets.
Tip 4 â€“ Mark Your Assets
The bankruptcy law allows you to mark any property that you wish to protect. This property will be exempted while considering your bankruptcy estate.
Tip 5 â€“ Respond to Creditors' Challenges within 30 Days
Make sure you respond to creditors' challenges within 30 days following their meeting. In cases where no objection is filed, you can freely protect your assets. On the other hand, if your request has been challenged then you will have to make exempt property an obvious option. It is important that you demonstrate that you will be able to reestablish yourself as soon as bankruptcy is over.
In addition to the above, you should also know that your pension, 401 k plans, and IRAs are never part of a bankruptcy estate.