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What can you protect during Chapter 7 and Chapter 13 bankruptcy?

On Behalf of | Apr 2, 2024 | Uncategorized

In times of financial distress, bankruptcy can offer a lifeline to individuals overwhelmed by debt. However, the prospect of losing one’s assets, especially homes and vehicles, looms large and often deters people from considering this option.

However, bankruptcy offers protection for essential assets. Understanding the nuances of bankruptcy, particularly what assets are retained under Chapter 7 and Chapter 13, is crucial for making informed decisions about financial recovery.

Understanding exemptions: The key to protecting your assets

The cornerstone of shielding your assets during bankruptcy is a concept called exemptions. These allowances outlined by state law exempt certain types of property from the risk of liquidation by the bankruptcy trustee during a Chapter 7 process. In simpler terms, exemptions define what you get to keep. New Jersey offers federal and state exemptions, allowing you to choose the set that protects your assets most effectively.

Navigating Chapter 7: Protecting essential belongings

Chapter 7 bankruptcy is known for its quick debt elimination process. However, there’s a catch – in rare cases, a court-appointed trustee may sell non-exempt assets to pay back creditors. Thankfully, the Garden State boasts a generous homestead exemption, allowing you to protect a significant portion of your home’s equity, in addition to essential furniture, appliances and clothing within reasonable limits.

Additionally, you can exempt your car up to a certain value; this can help ensure you have transportation. Moreover, exemptions shield a portion of the tools you need for your profession. That said, it’s crucial to remember that exemption limits apply. As such, while liquidation of a filer’s assets is rare, you should seek legal guidance concerning your risk of this turn of events before committing to this approach.

Chapter 13: Repayment plans and asset retention

Chapter 13 bankruptcy can allow you to develop a court-approved repayment plan to settle your debts over three to five years. While you’ll still need to designate some income for creditors, Chapter 13 offers a significant advantage – you should be able to keep all your property, exempt or not.

During the repayment period, you’ll make monthly payments to the trustee, who will distribute the funds to your creditors. Once the plan is completed and you’ve fulfilled your obligations, any remaining debt is discharged.

Whether Chapter 7 or Chapter 13 is the better option for you will depend on your specific financial circumstances and goals. Consulting with an experienced legal team can come in handy at this point. This is because they can assess your situation, advise you on the best course of action and help ensure you maximize asset protection as you move forward.