While bankruptcy might seem like an overbearing proposition, it is important to know that there are also exemptions available to those filing for bankruptcy. Generally, exemptions will protect some of your property and assets from collection by creditors, which is good for those dealing with bankruptcy. Exemptions can be a great relief to those dealing with bankruptcy, so knowing what to look for is definitely important.
How Exemptions Work
Exemptions are often a state-to-state affair, with different exemptions for different parts of a debtor’s property, but the workings of bankruptcy exemptions are essentially the same no matter where you are in the US and what property you are talking about.
Take, for example, a car. Many states give those filing for bankruptcy an exemption on vehicles. Say your state’s vehicle exemption is $2000. This means that any car valued under $2000 can be kept by the bankruptcy filing. However, the vehicle valued higher than $2000 will be sold off by a creditor or as part of debt collection, and the filer will be given a $2000 credit towards their debts with the rest of the profit from the sale of the vehicle going to creditors.
If you’ve not been living in the same state for more than two years, exemption rules become a bit complicated. However, if you have been living in the same state for more than two years, you should follow that state’s exemption rules. When filing for bankruptcy, make sure to familiarize yourself with your state exemption policies to see how you are protected against bankruptcy collection.