Bankruptcy does not always involve the total liquidation of all one’s belongings. For example, in the most common type of consumer bankruptcy, known as Chapter 7 or “liquidation,” consumers may not be forced to liquidate their home in order to pay off debts.
In Chapter 7 proceedings, consumers will usually have many of their assets seized by the government for the purpose of paying their overdue debts. Nevertheless, certain classifications of property will be exempt from the Chapter 7 process. Family homes are one type of property that will generally be exempt up to a certain but reasonable limit. In addition, bankruptcy filers will usually be permitted to keep their motor vehicle, 401(k) plans, pensions, IRA accounts, items and property essential to daily life and/or carrying out one’s career, and more.
It is important to note that even though there is a guide to how bankruptcy works, it does not always work according to the strict letter of the law. When it comes to what items are exempt from bankruptcy, for example, the topic may be up for debate. This is where a trained and experienced bankruptcy law lawyer can be very helpful. Bankruptcy lawyers have studied the law closely and their goal will be to use the laws in your favor to help you get as many of your assets exempted from liquidation as possible.
For the above reasons and more, Kentucky residents are always encouraged to speak with a bankruptcy lawyer before filing for bankruptcy protection. Indeed, it is important to know what personal items one could lose, and what items one will probably be able to keep before one enters into the bankruptcy process.
Source: Washington Post, “What happens to your house when you file for bankruptcy,” Jonnelle Marte, July 26, 2016