Contrary to common misconception, declaring bankruptcy does not mean being stripped of all your personal possessions. The goal of Chapter 7 bankruptcy is to support individuals struggling with overwhelming debt to get back on their feet. Depriving people of a place to live and other essentials would be counterproductive. Therefore, when you file for Chapter 7, the law allows you to keep certain items off-limits from seizure.
How exemption works when filing Chapter 7 bankruptcy
Filing Chapter 7 bankruptcy can discharge most of your debts, helping you restart with a clean slate. Still, the creditors you owe still need to be paid. A bankruptcy trustee will seize a portion of your assets for liquidation, using the funds generated to pay off creditors.
You can use bankruptcy exceptions to keep essential assets, particularly those you need to maintain a home and employment. Among the assets you can keep include your home, vehicle, work equipment, and certain personal property such as clothing, appliances and furniture.
When filing for bankruptcy in New York, you can choose from two sets of exemptions: state or federal. One major distinction between the two lies in the homestead exemption. New York homestead exceptions are far higher compared to the federal scheme.
Although New York’s exemptions are generally more substantial, in some cases, federal exemptions could provide benefits that better suit your needs. Each set of exemptions has different limits, so it’s crucial to evaluate which set aligns best with your specific situation.
You don’t have to be afraid of bankruptcy
Filing Chapter 7 bankruptcy does not leave you with nothing. Rather, it is an opportunity to eliminate burdensome debt and reset your finances. A bankruptcy attorney can help you take advantage of New York’s exemptions to protect your properties so you can start rebuilding your life.