The realization that you have to file bankruptcy to get on top of your financial situation again can bring up a lot of difficult feelings. One of these is the fear that you’re going to lose all of the assets that you worked hard to purchase.
Before filing, you should take a bit to learn about bankruptcy exemptions. Certain assets are exempt from the bankruptcy process, which means they can’t be seized as part of the process. Assets that aren’t exempt can be seized and liquidated at the bankruptcy trustee’s discretion to satisfy all or part of the debt balance.
Are exemptions set by federal or state law?
People who file for bankruptcy in California don’t have the option of choosing between federal and state exemptions. Instead, they have to choose between Section 703 and Section 704 exemptions, which are set by state law.
One of the main differences between Section 703 and Section 704 exemptions is that Section 703 is usually ideal for people who don’t own a home or who have owned their home for less than 10 years. Section 704 is usually better for those who have owned a home for at least a decade.
Exemptions allow bankruptcy filers to keep home equity, vehicle equity, jewelry and wildcard amounts up to a certain limit. Retirement accounts, life insurance, Social Security and public benefits are all fully exempted under both sections.
Sorting through the assets to determine what’s exempt and what’s non-exempt can be challenging. Seeking assistance from someone who can help with this is beneficial for anyone filing for bankruptcy.