Can you keep all of your stuff in bankruptcy?

Can you really keep everything you own all the way through bankruptcy?  You can usually keep items that you own outright (on which you do not owe any money) and you can usually keep those items on which you are making payments to a creditor (like your home or car), IF you can meet certain conditions. Most people who file for Ch. 7 bankruptcy can keep what they own because of laws known as “exemptions.”

Most people know that a they can get a discharge of debts in exchange for liquidating their assets – in other words, selling off your stuff.  BUT, don’t forget that you can keep whatever that the law protects. And MOST of the time, the law protects ALL of your stuff! So most people who file a Chapter 7 get a bankruptcy discharge without forking over any of their stuff.

“Exemptions” are listings of the types of stuff that the law protects from your creditors – these listings generally are found in statutes and they are generally limited by certain dollar amounts.  Exempt items are protected from the Chapter 7 trustee, who acts for the benefit of your creditors.

Exemptions can be complicated.  The Bankruptcy Code contains a set of federal exemptions and each state also has its own listings.  Some states, such as New Jersey, give you the choice to use either the federal or the state exemptions.  Other states only allow you to use the exemptions provided under state law.  If you have moved from another state fairly recently, you may have to use the exemption rules of your prior state.  Because each state’s rules can differ from one another, quite a bit of money might be at issue, depending on what day your bankruptcy is filed.

Once you know which set of exemptions you are going to use, it may not be crystal clear whether all of your stuff is protected. So deciding whether an item is exempt – protected – is often more complicated than scanning a list of exemptions and fitting all your assets in.  And what if you own one or more items that don’t fit any of the listed exemptions? Can the items be protected? These are all issues that you should discuss with a bankruptcy attorney before making any major decisions about your stuff.

Call (201) 676-0722 for a free New Jersey bankruptcy consultation.

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