Bankruptcy is a helpful legal process for individuals dealing with financial challenges. Those with credit card debts or insurmountable medical bills may choose to file for personal bankruptcy as a means of regaining control over their finances.
Bankruptcy can help people eliminate some of their debts and protect them from aggressive collection efforts. Despite the benefits, many people feel averse to filing for personal bankruptcy. They may worry about social stigma or damage to their credit reports.
They may also feel concerned about the possibility of losing their assets. Some people call Chapter 7 bankruptcy liquidation bankruptcy. That name comes from the possible obligation to sell certain assets before the courts grant the filer a discharge.
Do people who file for personal bankruptcy have to give up all of their valuable property to eliminate their debts?
The law provides bankruptcy exemptions
Although asset liquidation is sometimes necessary during a Chapter 7 bankruptcy, most people who qualify for Chapter 7 proceedings can avoid asset liquidation. There are exemptions allowed under the law. Federal and Oregon state laws both offer exemptions for specific property.
Filers in Oregon have the option of choosing either federal or state exemptions. They can protect various resources with those exemptions. For example, many people worry about their primary residences. Those using Oregon state exemptions can preserve up to $40,000 in home equity or $50,000 if filing with a spouse. Federal exemptions allow for up to $31,575 for single filers or $63,150 for couples.
Retirement savings accounts and pensions typically also have protection during bankruptcy. Provided that people use 401(k)s, IRAs and other specialized accounts, they can potentially preserve all of their retirement savings during a Chapter 7 bankruptcy. Other exemptions available for those using Oregon exemptions include vehicle exemptions. Drivers can preserve $3,000 in vehicle equity with state exemptions or $5,025 with federal exemptions.
There is also a wildcard exemption for other assets, including personal property. There are different exemptions available for those using the federal exemptions instead. Filers can protect jewelry, clothing, household goods, farm animals, capital in bank accounts and even burial plots. It is possible for filers to retain most, if not all, of their valuables.
Reviewing personal resources and current exemption limits with a skilled legal team can help those considering Chapter 7 bankruptcy determine if their property may be vulnerable and what type of exemptions to use. With careful planning, many people can complete Chapter 7 bankruptcy without liquidating any of their valuable properties.
