Many people believe that if they file for bankruptcy protection, they will be required to give up all of their possessions; however, that is generally not the case. Bankruptcy protection is designed to assist those with financial issues and give them a new beginning without having to stress over insurmountable debt.
Accordingly, individuals who have been contemplating filing for bankruptcy protection should continue to do so, keeping in mind that there are different options available based on their particular situation that will allow them to keep certain amounts of property.
Exempt property rules
The Texas Property Code provides information to potential bankruptcy filers with respect to which property is exempt. In fact, the state rules regarding exempt property are more liberal in some respects than the federal rules of exemption; however, the state rules are also more limiting in other areas by comparison.
It should be noted that the rules provide individuals with some sort of allowance for certain types of property, including:
- Wages or other income
- Household items and family heirlooms
- Clothes, jewelry and athletic equipment
- Family home
- Retirement accounts
There is also an exemption for college savings plans, livestock and household pets.
Evaluate the options ahead of time
As part of one's evaluation process for determining which type of bankruptcy to file, individuals should look at their major assets and figure out whether or not they will be able to keep them. For instance, a home is typically a person's most valuable asset. Therefore, before filing, individuals should take time to figure out whether they will be able to keep that home. Those with high income may be able to keep their home under a Chapter 13 filing and make the mortgage payments under the plan. However, those who have been struggling with the payments might be forced to sell a home that has a great deal of equity if a Chapter 7 filing is selected.
Furthermore, those individuals who have vehicles or boats in their possession will want to examine their options before deciding on a particular type of bankruptcy. This is important because individuals who have listed their car as collateral on a loan will have made that loan a secured loan, and the creditor might still be able to take the property even in bankruptcy.
Knowing the exemption rules before making a bankruptcy selection can prove to be very beneficial for those who are seeking to keep as much of their property as possible. That being the case, seeking the advice of a legal professional would be wise because he or she will be able to explain the exemptions and their applicability to the specific circumstances at hand.