The opposite is true. Most individuals will not be required to give up any property they wish to retain. The primary objective of bankruptcy is to provide individuals with a fresh start, liberated from the burdens of their massive debts. This objective would be impossible to achieve if it required individuals who cannot pay their debts to surrender all of their property to the bankruptcy court.
Using exemptions, the Bankruptcy Code allows individuals to retain a certain quantity of their property. Whether you choose a state or federal system determines how much you can protect. Each system is distinct and would be preferred contingent on the specifics of each situation.
In the state of Washington, for instance, a person can choose the Washington Exemptions and protect more than $100,000 in property equity. The federal limit is nowhere near approaching this level. Many individuals in Washington, D.C., do not have this concern and find the federal bankruptcy system to be adequate for their situation.
One exemption available to individuals under federal law allows them to protect $3,450 worth of automobile value. This number represents the equity in a vehicle.
Numerous individuals have financed depreciating automobiles that are worth less than what is obligated. If your vehicle is subject to a loan that exceeds its value, you do not need to include this amount in your exemptions. No equity exists in the car.
A 2007 Ford Mustang, for instance, has so many miles on it and is in such condition that its blue book value is exactly $9,000. The client owed $12,000 on the automobile. Since there is no equity in the vehicle, the exemption quantity of $3,450 need not be utilized.
As long as you can afford to continue making payments or negotiate a deal with the lender that allows you to afford the vehicle, you will be able to retain it.
Changing the example so that the client owes only $6,000 on a car worth $9,000 would require exemptions to safeguard the vehicle. The $3,000 in equity will be paid in full, and the client will have the option to retain the vehicle.
If the equity exceeds $3,450 and the client wishes to keep the automobile, legal counsel should be sought to ensure appropriate exemption planning.
There is a wildcard exemption, for example, that would enable the client to exempt more than $3,450 on the vehicle.
It only becomes a problem for individuals with a substantial amount of valuable property. These individuals must carefully plan their limited exemptions to maximize their clients' interests. These exemptions have limitations.
However, the majority of individuals typically fall within the parameters of the permitted exemptions. This is true because virtually everyone does everything possible to liquidate their assets, repay their creditors, and avoid bankruptcy.
It is crucial to understand that you do not lose all of your property in bankruptcy. It is not necessary to be unemployed or homeless to petition for bankruptcy. Your attorney's objective should be to ensure that your interests are safeguarded to the greatest extent possible so that bankruptcy can serve as a catalyst to a new financial beginning.
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