Almost no one goes into the bankruptcy experience on a whim; often the filer has spent months agonizing over the pluses and minuses of the action before finally making a decision. Once you have made this important decision, it's wise to pause and ensure that you have your financial house in order. If you want to make the best of your chapter 7 bankruptcy, read on for some vital points to consider before you really file the paperwork.
Your Time in Residence
With a chapter 7 bankruptcy filing, there is a possibility of losing property, such as your home. If there is any one thing that makes many filers hesitant to file, it is probably the fear of losing their home. Every state, however, offers an exemption, known as the homestead exemption, that may work to help you keep your home. Since the value of your property (the equity) and the amount of your bankruptcy (your debt load) all figure into the interest the bankruptcy trustee shows in your home, the homestead exemption's value lies in how it allows for a reduction on the value of your home. To use the homestead exemption, you often must abide by the residential restrictions in your state. Be sure you understand how long you need to be a resident before you file, since the homestead exemption could allow you to keep your home.
Choosing State Exemptions
Every state has differing amounts on not just homestead exemptions, but on personal property exemptions as well. In some cases, your vehicles is lumped into the personal property bundle, but in some states it is separate. Personal property can apply to vehicles, furniture, jewelry, and more. The amount of the exemption is key, since it allows you to deduct some of the value, just like with the homestead exemption. If you have recently moved to a new state or are contemplating a move to a new state, be sure to check on the personal exemptions in each state. There are even some states that allow you to choose which state's exemptions you want to use, if you file within a certain time period.
While it's a chapter 13 and not the chapter 7 that is known as a debt reorganization tool, you can take some steps to protect some of your assets before you file a chapter 7 bankruptcy as well. Be sure to work closely with your bankruptcy attorney when selling and using assets in the months prior to a bankruptcy filing to avoid accusations of hiding assets. For example, you may be able to purchase an exempt asset, such as a car, using cash in your savings account, which is normally a non-exempt asset. Run anything through your attorney before doing so to stay on the safe side.
Make the most of your bankruptcy exemptions and keep your property by working with a bankruptcy attorney.