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Chapter 7
Chapter 7. If you are struggling with credit card or other unsecured debt, Chapter 7 bankruptcy can be a great way to take back control of your financial situation. Chapter 7 bankruptcy discharges all of your unsecured debt and stops the creditor calls once and for all.
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Chapter 13. If you are behind on your mortgage, car or taxes, Chapter 13 can be a great way to stop debt collection attempts (calls and lawsuits) and interest accruals while you reorganize on your finances. Your reorganization will help you get current and stay current on your home, car and taxes.
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Will I lose any of my assets if I file bankruptcy?
There is a misconception that when you file for bankruptcy, you lose everything you own. Not surprisingly, one of the first questions asked by people contemplating bankruptcy is what property they will lose. While this is a highly complex issue, generally many are surprised by how many assets they are able to keep in bankruptcy.
In a Chapter 13 bankruptcy, the debtor remains in possession of all of their assets and none are seized by the trustee and sold. Thus, as a general rule, debtors in Chapter 13 bankruptcies do not lose any of their property. Chapter 7, however, is a different story. The trustee takes possession of any nonexempt property of the debtor, and will sell it and distribute the proceeds to creditors. Thus, it becomes very important to understand exemptions and how they can protect your assets within bankruptcy, so always consult a Sherman Oaks bankruptcy lawyer.
In California, there are two sets of exemptions that a debtor can choose from, both are state law, but one is modeled after the federal exemptions while the other is not. As these sets of exemptions differ, it is important to choose wisely based on your own assets, liabilities, and goals, and bankruptcy lawyer Sherman Oaks can help.
First, let us look at some exemptions rooted in state law. You may exempt $2,725 worth of equity in your car, as well as $7,175 worth of jewelry, heirlooms, or art. There is a homestead exemption of $75,000 for an individual or $100,000 for a family that protects equity in your principal residence. Life insurance policies and retirement plans are generally exempt, but there are complicated issues associated with each, so remember to always consult a Sherman Oaks bankruptcy lawyer.
Finally, let us look at some of the California exemptions modeled after federal law. You may exempt equity in your car up to $3,525, jewelry up to $1,425, and household furnishings up to $550 per item. Retirement plans and life insurance policies are usually exempt, but there are complex issues surrounding them. There is a $22,075 exemption in any real estate the debtor owns (such as their home). However, probably the most powerful exemption available in this set is called the ‘wildcard exemption.’ If the real estate exemption is not used, it can be combined with an additional exemption of $1,175. This gives a total of $23,250 that may be used to exempt any property of the debtor. As you may notice, the homestead exemption is very small compared to the previous set of exemptions. Thus, for people with little to no equity in their home, or those who rent, this set of exemptions can often be used effectively. The wildcard exemption allows the debtor to exempt a more expensive car, personal property, or other important assets that other exemptions did not cover fully.
These are only a few examples of some of the exemptions available within bankruptcy. As you can see, there are plenty of ways to keep your property after filing bankruptcy. In fact, most Chapter 7 cases are “no asset” cases where there are no nonexempt assets for the trustee to take and sell. As these exemptions are complex and must be tailored to protect as much of your property as possible, it is always important to contact experienced bankruptcy lawyers Sherman Oaks, such as those at Wadhwani & Shanfeld, A Professional Law Corporation.