It isn’t uncommon to hear people say they fear losing all of their assets when filing for bankruptcy. People assume that their assets will be seized and liquidated by creditors in order to satisfy their debts. Although there are some instances in which certain assets may be liquidated, most of your personal property is protected in bankruptcy.
How It Works
Bankruptcy exemption laws outline specific rules regarding which of your assets are prohibited from being liquidated by creditors up to a specified value. Federal exemption laws can protect a home up to $125,000, one car per family and nearly $10,000 of your personal property from being seized by creditors in bankruptcy.
State exemption laws vary between states, but typically offer more protection than federal exemption laws. For example, Texas bankruptcy laws exempt a homestead of unlimited value, one car per licensed family member and up to $60,000per family worth of personal property from liquidation by creditors.
The decision to file for bankruptcy is stressful enough, there is no need to worry about losing your assets. Myths such as this prevent many people from taking advantage of the benefits bankruptcy can offer.