bankruptcy, the fate of your assets and property depends on the type of bankruptcy you file for and the specific laws in your jurisdiction. Generally, bankruptcy is a legal process that helps individuals or businesses who are unable to repay their debts by providing them with a fresh start financially. The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 1
In Chapter 7 bankruptcy, also known as liquidation bankruptcy, a trustee is appointed to sell your non-exempt assets to repay your creditors. However, not all assets are subject to liquidation. Each jurisdiction has its own set of exemptions that protect certain types and amounts of property from being sold. Exempt assets typically include necessities such as clothing, furniture, and personal items, as well as some equity in your primary residence, retirement accounts, and tools of your trade. Non-exempt assets, on the other hand, may include luxury items, valuable collections, second homes, or excess equity in your primary residence. The proceeds from the sale of non-exempt assets are distributed among your creditors to satisfy your debts.
In Chapter 13 bankruptcy, also known as reorganization bankruptcy, you create a repayment plan to pay off your debts over a period of three to five years. Unlike Chapter 7, you can usually keep all of your assets in Chapter 13 bankruptcy. However, the value of your non-exempt assets may affect the amount you need to repay to your creditors through the repayment plan. The plan is based on your disposable income, which is the amount left after deducting necessary living expenses from your monthly income.
It’s important to note that bankruptcy laws can vary significantly depending on your jurisdiction, so it’s crucial to consult with a bankruptcy attorney who can provide guidance specific to your situation. They can help you understand the exemptions available to you and the potential impact on your assets and property.