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Understanding exemptions in Chapter 7 bankruptcy

Many Florida residents who are in dire financial straits are unsure of how filing for personal bankruptcy will affect them. Bankruptcy can be complicated, and those who are considering this financial tool should take the time to learn the ins and outs of the process along with what their financial outlook will be once a Chapter 7 bankruptcy is underway. The following information is provided in the hopes of providing insight into the exemptions granted under this form of bankruptcy.

When preparing to file, many people are concerned that they will lose all of their property. One’s real and personal property are known as assets, and all of those assets will be included within the bankruptcy process. This does not, however, mean that all forms of property will be lost as the bankruptcy moves forward. Both federal and state law governs which assets are exempt from the bankruptcy process.

For example, an individual might hold ownership interest in a certain piece of property that is valued at $1,000. However, if the available exemptions for that piece of property only total $500, then the remaining $500 is not considered exempt. If the bankruptcy is liquidated, the filer could lose the property. Other forms of property may be fully exempt, in which case the property could be retained during the bankruptcy. In addition, most personal property, such as clothing and other belongings, are exempt from the bankruptcy process.

Each individual will have a unique set of needs when it comes to filing for Chapter 7 bankruptcy. Because the laws governing bankruptcy are so complex, it is a wise move to gain solid legal information before deciding when and how to file. Most Florida residents are able to make use of bankruptcy exemptions to retain a significant portion of their assets, but doing so requires careful adherence to applicable law.

Source: Michigan State University, “Should you file bankruptcy? Part 2”, William Hendrian, June 14, 2014

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