Kentucky residents filing for bankruptcy tend to worry the most about the idea of losing their homes during the process. Especially for those who file for Chapter 7 proceedings, where assets are sold off in order to pay off debts, the idea of losing one’s most prized possessions — like the family home — could be a serious deterrent.
Still, even under Chapter 7, not all assets can be seized as certain assets will benefit from exemptions up to a certain limit. Exempt assets may include cash, the family home, the family car, various kinds of daily life and work life essentials and more. Essentially, the government does not want the bankruptcy process to leave individuals high and dry and unable to carry out their normal life activities. They want bankruptcy to leave individuals with the base-level necessities they need to rebuild their lives.
It is important to determine what assets could be seized in bankruptcy and what will be exempt before engaging in the process. If it is determined that that the debtor has a steady income and does not want to have his or her assets seized, for example, Chapter 13 — debt reorganization — proceedings may be more appropriate.
Chapter 13 allows borrowers to create a plan that allows them to pay off their debts in just three to five years. Those who file for Chapter 13 will not lose any personal property. For this reason, many consumers who begin Chapter 7 proceedings later decide to switch to Chapter 13, which is very possible in many cases.
A Kentucky bankruptcy lawyer can help individuals assess whether bankruptcy is right for their needs. A lawyer will also help consumers decide between the Chapter 7 and Chapter 13 by weighing the different options and effects associated with them.
Source: Washington Post, “What happens to your house when you file for bankruptcy,” accessed Aug. 16, 2016