How-To Protect Property When Filing For Bankruptcy

Filing for bankruptcy is a stressful and scary time for many people. There is uncertainty, fear, and confusion when it comes to situations like these that make it very difficult for people to navigate without help.

Getting help when filing for bankruptcy is incredibly important because it can help you to keep things that you do need and negotiate your financial situation in a safe and financially healthy way so that you can get back on your feet sooner rather than later.

In addition, getting help from some experts when filing for bankruptcy can help you to keep your property. When filing for bankruptcy, many people expect that they will lose their property or home, but that is not always the case.

There are ways to protect your property when you file for bankruptcy so that you can preserve your property investment or home while you sort out your financial situation. Please read on to find out more about protecting your property when filing for bankruptcy.

Why File for Bankruptcy?

To begin, we first need to talk about why bankruptcy is an option for some people and what it means for you. The purpose of bankruptcy law is to provide a new beginning for people struggling financially. It allows them to get a fresh start on their finances through a bankruptcy discharge.

A bankruptcy discharge essentially allows the person filing for bankruptcy to get rid of their debt and re-enter the economy without their former financial baggage. This offers the opportunity for the person who filed for bankruptcy to work on their financial situation better in the future to not only better their own personal finances but to help fuel the national and global economy.

One of the primary issues with bankruptcy are that people do not often understand that there are exemptions and certain things that will not be taken when you file for bankruptcy. For example, clothing, transportation, and a job are often not taken when the person files for bankruptcy because they would have to purchase these items all over again when they come out of bankruptcy, which would be very difficult for them to afford after filing. The cycle would start anew and the person would file for bankruptcy again.

Exemptions to Bankruptcy Rules

There are exemptions to the bankruptcy rules. This is where the government allows American citizens to cheap a reasonable number of their possessions when they file for bankruptcy so that they can have a foundation for regrowth.

This means that the person will be able to keep items that will help them in the future to get back on their feet, grow their finances, and contribute to the local and national economy. This is also designed to prevent people filing for bankruptcy from becoming a ward of the state and relying on public health benefits to survive in our society.

Oftentimes these exemptions include some amount of home equity or personal property such as furniture, clothing, vehicles, tools used in the person’s profession, current wages, kitchen items, retirement accounts, child support, government benefits, and alimony payments. However, it is important to know that the number of these items protected by bankruptcy exemptions varies from state to state.

Do your research on what the state laws are for bankruptcy in your state so that you can be well prepared and know what the limitations on the exemptions are if you need to file for bankruptcy.

Some of the more common types of exemptions that are popular in a variety of states are the homestead exemption, the vehicle extension, and the wild-card exemption. Is important to know whether your property is protected under any of these exemption laws in your state. This is because each state has its own set of bankruptcy exemptions for the residents of that state to use when they file for bankruptcy.

The criteria for being able to use the exemptions of the state that you are currently living in are across-the-board similar. The criteria are that you must have lived in that state for at least the past two years or 730 days before filing for bankruptcy. If you have not lived in the state, you’re currently living in for at least 2 years or 730 days, you will need to use the state bankruptcy exemptions for 180 days before the two years before filing for bankruptcy.

If you moved to Idaho last year but lived in Massachusetts for three years before you moved, you would have to file for bankruptcy using the Massachusetts bankruptcy exemptions, not the Idaho ones.

Using the Homestead Exemption

The homestead exemption is one of the most popular and commonly used exemptions for people trying to protect their property during a bankruptcy case. The homestead exemption can often protect your house in a bankruptcy case, but it is not a cure-all exemption that can protect everyone’s property. There are certain criteria and other limitations to this exemption that needs to be known.

The homestead exemption does not protect every single property that you own. The homestead exemption usually only applies to the filer’s primary residence and beyond that, the exemption process is not consistent. Many states will put a limit on the amount of acreage or property that is eligible to be protected under a homestead exemption, while others allow trailer homes to be protected.

The last Federal homestead exemption adjustment was adjusted for inflation on April 1st, 2022. The current federal homestead exemption is $27,900. However, this does not necessarily apply in all states. New Jersey has no homestead exemption at all, but South Dakota has an unlimited homestead exemption.

Get in touch with a good lawyer who understands the logistics of bankruptcy cases and is well-versed in the property laws and bankruptcy exemptions in your state. The Elmer Law Firm can provide bankruptcy legal services in Tuscaloosa and Jasper, Alabama.


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