Many people assume that their assets are at great risk for liquidation when filing for bankruptcy. This is simply not true. Not only is bankruptcy one of the best ways to protect your assets when dealing with debt resolution, but there are numerous bankruptcy exemption laws that are designed specifically for protecting these assets.
There are two ways to protect your assets in bankruptcy: federal or state exemptions. The bankruptcy code offers anyone filing for bankruptcy the opportunity to claim the federal exemptions in order to protect their property. While these exemptions are deemed sufficient for protecting high priority and necessity items, such as a house, car and clothing, they may not always cover as much as a state exemption would.
Many states offer bankruptcy exemptions that protect assets up to a higher value, but may not protect as much of a variety of personal property as the federal exemption. For example, the Texas bankruptcy exemption laws allow for a person’s home to be protected from liquidation without setting a limit to the maximum value of the home; whereas the federal exemption only allows for up to $125,000 value of a home to be protected. On the other hand, the federal exemption allows for protection of a vehicle up to $3,450; whereas some states may only allow a value up to $3,000. While these differences may seem subtle, anyone filing for bankruptcy should take the time to fully review both the federal and their state’s exemption laws to maximize their asset protection in bankruptcy.