Many people across New Jersey and Pennsylvania fear filing for bankruptcy because they think they will lose everything they own. But there are ways to keep certain assets in bankruptcy. The key is finding the right bankruptcy path for you and properly filing with the bankruptcy court. In fact, many people manage to save assets through bankruptcy that they would have otherwise lost to repossession or foreclosure.
State or federal exemptions?
The government allows bankruptcy filers to keep most of their property. The federal government created a list of property that you can claim as exempt up to a certain dollar amount. That means creditors can’t take that property to pay your debt. States can create their own lists and Chapter 7 filers can choose whether to follow the state list or the federal list. Most filers in New Jersey and Pennsylvania choose the federal exemptions. If your asset is worth more than the protected amount, you may want to consider Chapter 13 bankruptcy.
Chapter 7 vs. Chapter 13
Many individuals choose Chapter 7 bankruptcy because it provides them with a clean slate. It works best for people who have limited assets and overwhelming debt. It gives you a chance to start over by eliminating almost all of your debt and allows you to keep your car and personal possessions. Note that you can only keep a car worth a certain amount under the exemptions, and if you have a loan on that car, you must be current with your payments in order to keep the car or make other arrangements with your lender.
Chapter 7 sounds like a great deal, so why do people end up in Chapter 13? Not everyone can qualify for Chapter 7 and the rules are quite strict. In addition, if your house or another large asset is one of the things you are trying to hang onto, then you need to go through Chapter 13. Chapter 13 can stop foreclosure on your house. Your debt is not automatically wiped away, however. You will set up a payment plan with the court to pay a lowered debt amount over the next three to five years.
Make sure you understand your rights and responsibilities when heading into bankruptcy. If you follow the proper procedures, you may be able to keep most of your assets.