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What you should know about Chapter 7 bankruptcy

Chapter 7 bankruptcy proceedings are often seen as the last resort financial solution for Kentucky residents. Although Chapter 7 proceedings are -- in many cases -- the last thing indebted individuals do when they are backed into a debt corner, this is no reason to look at bankruptcy as a negative. Indeed, these proceedings should be viewed as a way of turning a new leaf and getting a new financial lease on life. By resolving the toxic debt that has plagued you for years, you will be taking care of stress, releasing your burdens, simplifying your life and starting fresh.

Aside from the negative stigma associated with Chapter 7 proceedings, there is another very scary element of the process: "liquidation." Most people wrongfully assume that they will have to liquidate 100 percent of their possessions, including the kitchen sink. This is not true. A lot of personal possessions will be completely exempt from bankruptcy.

The following exemptions apply to different possessions, usually up to a certain value. For example, your vehicle usually cannot be taken away from you -- but if it's an extremely expensive luxury vehicle, you might be forced to trade it in for a downgrade. Furthermore, reasonably necessary clothing, furniture, household goods, household appliances and jewelry will also be exempt. A portion of the equity you have in your home will be exempt from liquidation, too, so it may not be necessary for you to move from your house. The tools of your profession or trade will be exempt as well. Finally, your pension, public benefits and any personal injury damage awards will also be exempt from bankruptcy.

Because certain property will be exempt and certain property will not, it is important to discuss what possessions you have with your bankruptcy attorney to determine what is at stake if you proceed with the Chapter 7 process. Your attorney will be able to create a strategy that aims to retain as much of your personal possessions as possible through your bankruptcy proceedings.

Source: FindLaw, "Exempt vs. Non-exempt Property Under Chapter 7," accessed Dec. 23, 2015

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