Exempted Assets In Personal Bankruptcy

Copyright (c) 2009 Suzy Vanstrusen

Personal Bankruptcy is often an option considered by those with serious debt problems. Most people have the false notion that filing for bankruptcy is the easiest way to get off from debt. But if you are considering bankruptcy just to escape from your financial obligations, you need to take a step back and learn more about bankruptcy.

The fact is, the government has already made adjustments on the bankruptcy procedures to make sure that this option is not abused by everyone. In the past years, one can simply file for bankruptcy and wait for rejection or approval. Today, before one can even file bankruptcy, it is necessary to take up a credit counseling course at least six months prior to filing. The accredited credit counseling agency would be the one to decide if a personal bankruptcy is indeed recommended. Otherwise, alternative steps would be taken to help the individual get out from debt.

Let's say you've been advised by the credit counseling agency to file for bankruptcy. Does this mean you're going to lose all your properties such as your home, car and other possessions? Let's talk about assets that are exempted in personal bankruptcy:

The government has actually made provisions for people with extreme debt problem and filing for bankruptcy is one of them. This means, in the event of bankruptcy, the individual will still be allowed to keep the properties he needs to survive. Of course, this includes the home and other important assets.

Upon filing, the individual will be required to submit a detailed report of all possessions in his name including investments, savings accounts, insurances, etc. Bankruptcy lawyers are also required to do the filing and ensure the accuracy and correctness of the documents. Take note that providing false information is a federal offense and can only worsen your problems. In filing the bankruptcy documents, always provide true and correct information.

After submitting your bankruptcy application, it will then be subject for review. Pensions and the IRA are exempted from bankruptcy as well as college funds or educational funds for individual's children. Generally, if you have more than 80% outstanding balance on your mortgage, you will be allowed to keep your home. A car that is less than $2000 can also be kept as well as $2000 in your checking or savings account.

You will also be subjected to take the bankruptcy means test to determine whether you'll be eligible for a Chapter 13 or Chapter 7 bankruptcy. Chapter 7 releases the individual from all debts to his creditors. Thus, creditors are prohibited from making further attempts to collect debts.

Meanwhile, a Chapter 13 puts the individual under a bankruptcy repayment plan where you will be required to submit a certain percentage of your monthly wage as repayment to your creditors. The amount of monthly payment will depend on the arrangements ordered by the bankruptcy court.

The bankruptcy process is indeed complicated and it is a must to take the appropriate measure to understand all conditions involved in the process. Your bankruptcy lawyer is indispensable in helping you get through the procedures correctly and in giving you the assistance you need.