One of the reasons people avoid filing for bankruptcy is that they have heard they have to get rid of their personal property. The requirement to sell off or liquidate assets can completely eliminate the financial benefits someone might derive from the discharge of their unsecured debts.
No one wants to give up the assets they have spent a lifetime accumulating. Many people would prefer to continue struggling with debt payments indefinitely rather than risk the loss of their home equity or other valuable property. However, bankruptcy does not involve the loss of all your assets.
The truth is more complex than what people assume.
There are multiple kinds of bankruptcy
There are different kinds of personal bankruptcy, and not all of them require the liquidation of your assets. In a Chapter 13 bankruptcy, for example, you make payments on your debts through the courts for years and won’t have to liquidate your property.
In Chapter 7 or liquidation bankruptcy, you will need to report your assets and provide financial records to the court. Of course, you still have the opportunity to protect your most valuable assets.
Virginia offers multiple bankruptcy exemptions
When you file for a Chapter 7 bankruptcy in Virginia, the trustee assigned by the courts will have to review an inventory of your property that you provide and determine if any of your property requires liquidation, as well as the distribution of any proceeds among your creditors.
You can exempt a significant portion of your most valuable assets. A single adult filing for bankruptcy can exempt $30,000 worth of home equity, for example. Those with less equity than that can apply the remaining balance of the $25,000 as a wild card exemption for other assets.
Those filing Chapter 7 bankruptcy can exempt up to $5,000 worth of household furniture, $5,000 in family heirlooms, $1,000 in clothing, all pets and up to $3,000 in firearms as personal property. Filers can also protect up to $6,000 in equity in a motor vehicle. People can protect up to $10,000 worth of tools for their trade, insurance benefits, like life insurance policies.
Your assets influence the best approach to bankruptcy. If you have far more property than what you can protect with Virginia bankruptcy exemptions, filing a Chapter 13 bankruptcy may be a better option for you. Learning more about the basics of Chapter 7 bankruptcy will help you put the battle with debt behind you.