When it comes to bankruptcy, the fear of losing personal property can stop many from filing. Some of that fear is unfounded, however. Read below and find out what exemptions can do for you when you file chapter 7.

Assets Can Be Seized

While it seldom happens to most filers, chapter 7 law allows the trustee to take assets from filers. The asset is sold and the money goes toward certain administrative expenses and more. If enough assets are seized, certain priority creditors are paid as well. For bankruptcy purposes, assets can include your home, vehicles, tools, bank accounts, and more.

Exemptions Protect Your Assets

It's not the intention of the bankruptcy courts to leave filers penniless and homeless just because they filed for bankruptcy. Thus, exemptions can be used to protect some property. Each state has its own unique set of exemptions and they range from very generous to quite stingy. An exemption can be a named item or it can be a sum of money that may be deducted from an item. For example, one state might allow all filers to retain a primary residence of any value while another state might allow the filer to deduct $20,000 off the value of the home to reduce the likelihood of seizure.

What Else to Know About Exemptions

1. It's important to take into consideration how things are valued. For example, used clothing and furniture have little value to the bankruptcy court due to their depreciation.
2. Another important issue concerns secured debts and property. If a property is secured by a loan, there may not be enough value in the item to make it worth seizing. The loan would have to be paid off by the bankruptcy court before it could be sold.
3. As noted above, states have different exemptions. Some even allow the filer to choose between federal exemptions and state exemptions.
4. In some states, married filers that file chapter 7 jointly can double their exemptions.
5. Wildcard exemptions exist in some places. That is a sum of money, such as $5,000, to be used as an exemption on any item of the filer's choosing.
6. Those recently relocating to a new state may have the option of using the exemptions of either their new state or the previous state.

Exemptions allow filers to retain personal property while still obtaining the debt relief they need. Talk to a bankruptcy lawyer to find out more about exemptions and how they will affect your bankruptcy.