Filing Chapter 7 may be intimidating at first because it is a liquidation process, which means the court can seize your assets and sell them to repay your debts. However, the court does not want to leave you destitute after your bankruptcy. The goal is to help you get back on your feet, so the law allows you to keep certain assets, which are known as exemptions.
FindLaw explains that every state has its own exemptions, but the exemption process is complex. Exemptions may have limits on value or may have to meet specific requirements, which can make it difficult to understand exactly what assets you can exempt. So, while you may need guidance on the specifics, you can learn a little about the general aspects of exemptions.
Asset limits
You will typically be able to keep some of the more important assets that you own, such as your home and your vehicle. However, you should be aware that you will have value limits on these items. For example, if the exemption for a home is $20,000 and your home is worth more than that, it could cause issues. In general, the limit on exemptions is rather low because the idea is to allow you to keep a modest amount of assets while allowing the court to liquidate excessive or extravagant assets.
Wildcards
You will have a wildcard exemption, which you can use for anything you want. Often, what you will do with this is use it to allow you to keep a bigger asset that is exempt but that has a limit too low. For example, if the home exemption does not cover the full amount of your home, you could apply the wildcard to your home to help cover it.
Other exemptions
Beyond the standard important assets you may want to protect, exemptions will also cover other personal property that you may want to keep. This might include valuable jewelry, musical instruments, clothing and home furnishings.
