Although filing for bankruptcy could protect someone dealing with aggressive creditors and other debt issues, some about how the courts will treat them. Liquidation bankruptcy may bring concerns about losing assets the debtor might wish to keep. California residents not versed in bankruptcy law might not realize exemptions exist under both state and federal law, and those federal exemptions recently increased.
Bankruptcy exemptions
As the name suggests, exemptions refer to assets that creditors cannot touch. So, someone who works as a mechanic might discover the court would protect many tools and other equipment from bankruptcy sales. Those worried about retirement savings may find the laws protect their Individual Retirement Accounts.
Federal statutes also establish a dollar amount exemption on assets. So, a specific dollar amount for household goods would protect those items up to that amount. Anything over that amount may end up liquidated. While would-be filers might not like to hear the exemption amounts have a ceiling, they may appreciate the news that on April 1, 2022, the federal exemption amounts will increase.
The exemption increases involve many assets, and some exemption thresholds differ. Motor vehicles now receive a $4,450 exemption level, while tools of the trade receive $2,800. Those intending to seek bankruptcy protections may wish to review those exemption amounts. Knowing the exemption levels could change someone’s perspective about bankruptcy filings.
Other things to consider when filing
There are other things to understand about bankruptcy. Anyone interested in filing for Chapter 7 must realize means test requirements exist. Those who do not meet the income and other criteria of the means test may need to file for Chapter 13 bankruptcy. It may also be an option to retake the means test at a later date.
Ultimately, filing for bankruptcy could benefit someone struggling with debt. If current income can’t cover outstanding obligations, bankruptcy might be the only way to address the situation.