Personal Assets Protected during the Bankruptcy Process

The object of the bankruptcy law allows debtor to start fresh life. Though the bankruptcy filed, yet certain assets are protected and hence exempt from liquidation. The assets can be protected whose value is less than the specified dollar. It means if the debtor has a bank account or tax refund which is less than $1,000 is an exempted asset.

However the protection of personal assets based on the residence of the debtor.  Therefore person living in Maryland can use state exemption whereas the person of Pennsylvania can choose federal and state exemptions. On the other hand, federal exemptions can be claimed by a person who is residing at District of Columbia. Depending upon the situation, the debtor can file bankruptcy under Chapter 7 or 13.

If the person filed Chapter 7 bankruptcy, the person can claim federal exemptions like exemption of personal assets like homestead, life insurance policy, jewelry, household goods, motor vehicle, personal injury compensation payments, trade’s tools, wild card etc. However the exemption is limited to specific value. It means the value of Jewelry is limited to $1,225 whereas household goods are exempted up to the value of $9,850.  As far as homestead exemptions are extended to $20,200 and life insurance policy exempted up to the value of $9,850.  Motor vehicle exemption is limited to $3,225 and personal injury compensation payments are allowed up to 18,450.

The personal assets vary from state to state. If a person living in the State of Iowa  and filed bankruptcy under Chapter 7 is protected the personal assets from the liquidation. Hence the person can kept the personal assets like, Books worth of $1,000, personal belongings worth of $7,000 besides wedding and engagement rings, insurance policy with unlimited value if it is more than two years etc. besides, the debtor also protected the assets like residential deposit up to $500, social security, public assistance, unemployment benefits, veteran or disability benefits etc.  The person can also keep shotgun and one rifle, but handguns are not allowed.

Therefore it is not correct that the persons who file bankruptcy will lose everything they own.  In fact bankruptcy law allows the debtors to start new life with the protected personal assets.  The individual can file for state exemptions or federal bankruptcy exemption, but cannot choose both. Choosing of bankruptcy under Chapter 7 or Chapter 13 is mainly related with the keeping of assets after bankruptcy.