Know the exemption clause in a Chapter 7 bankruptcy
Bankruptcy exemptions have a very important role to play in your Chapter 7 bankruptcy. The best person to guide you in this matter is your lawyer. When you approach your bankruptcy attorney for filing the petition, you must disclose everything about your assets and liability position. After evaluating the same, he will be in the right position to guide you. You have a variety of bankruptcy exemptions in Chapter 7. The best part of it all is that you can retain possession of your exempt property even during the bankruptcy. The trustee will not touch such exempt property.
Every state has a set of exemptions that apply in Chapter 7 bankruptcy. 17 states allow you to choose either the state exemptions or exemptions created by the Congress. You cannot use both. California is the only exemption in the fact that it has two sets of exemptions.
Let us see how they work. If you have a car worth $3000 and the state exemption is $5000, you can retain your car. However, if the car is worth $15000, the trustee will sell the car and liquidate the liability of the unsecured creditors after paying you $5000 as exemption value. The trustee will deduct his fees as well. Thus, understanding your exemptions is very important before filing the petition. Hence, it is imperative for you to seek the guidance of the bankruptcy attorney before attempting any bankruptcy petitions. You might stand to gain in many cases.