Even if you are drowning in debt and unable to keep your head above water, bankruptcy may feel out of the question. What about my house? My car?
Bankruptcy can be extremely scary if you think that you will have to give up everything you own in the process. However, the picture of someone out on the streets after pursuing bankruptcy protection is largely a movie-ism. In real life, you will be able to keep important property.
You’ll only have to part with non-exempt property
During bankruptcy, you must turn over some of your property to a bankruptcy trustee. The trustee then values and sells the property, applying the proceeds to your debt. This first step is often the most overwhelming, but it is not as scary as most might think, as it only involves non-exempt property.
Non-exempt property is anything of yours that is not necessary for modern life. Collectible items, heirlooms and other items of significant emotional value are usually non-exempt, as are secondary vehicles, investment properties and cash.
What is exempt property?
Exempt property includes whatever is necessary for modern life. For most people, this includes their home, primary mode of transportation, reasonable clothing and home furnishings, public assistance and more. Since bankruptcy clears the way for better finances in the future, it is unreasonable to ask you to part with necessities you would have to repurchase.
Property that is exempt from bankruptcy will differ from person to person. Tools of your trade are almost always exempt, even if they are non-exempt for other people. A construction worker is likely to keep his or her tools while someone who tinkers in their garage will probably turn them over. The same goes for professional musicians versus hobbyists.
Bankruptcy protection can be more important than property
Even though you will keep all your necessities for modern life, it can be difficult to part from items of significant emotional value. Although this is understandable, it is important that people in Iowa understand the true breadth of benefits afforded by bankruptcy.
Bankruptcy law is a complex topic that can overwhelm even the most informed individuals. Resources regarding bankruptcy protection, exempt property and more are readily available to you.