Finance Information - Approved Tips: Bankruptcy Myth: You Lose ...

There needs to be an effort to dispel some of the damaging myths out there surrounding bankruptcy that do nothing but help to keep people stuck in a disastrous financial situation. One big piece of misinformation is that people think they will lose their property if they file bankruptcy.

This is not true. For most people, they will not have to give up any property they wish to keep. Bankruptcy's primary goal is to give people a fresh start, free from the burdens of their massive debts. This goal would be impossible to pursue if it required that people who cannot afford to pay their debts were forced to hand over all their property to the bankruptcy court.

The Bankruptcy Code allows people to keep a certain amount of their property through the use of exemptions. How much you get to protect depends on which system you choose, state or federal. Each system is different and would be preferable depending on the circumstances of each case.

For instance, in the State of Washington, a person can choose the Washington Exemptions and protect more than $100,000 in equity in their home. The federal limit does not come close to approaching that level. For some reason, many people do not have this particular concern in the Washington and find the federal system perfectly good for their bankruptcy.

If your car is worth more than what you owe, the federal system allows you to protect a certain amount. The limit is $3,450 dollars in equity in your car.

Most people do not have a need for this particular exemption because the value of a financed car is usually way below what is owed on the car. If there is no equity, then no need to claim the exemption. You can keep the car if you like.

If a 2007 Ford Mustang has low miles and is in good condition, perhaps the blue book value would be around $9,000. If the client owes $12,000, the exemption is not needed. There is no equity in the car.

If you can afford to make the payments or work with your creditor, you will not lose your car in bankruptcy.

If the Mustang is only worth $9,000 and the debtor owes $6,000 then the exemption would be needed to protect the value. But understand that you do have room to protect your property.

The only debtors who really need to be concerned about this are people with substantial assets. These people need attorneys to help them plan how to best use their limited exemptions.

Most people, however, tend to fall well within the parameters of the exemptions allowed. This is true because almost everyone does everything in their power to liquidate their assets, pay off their creditors and avoid bankruptcy.

That is why it is important to know that you don't lose all your property in bankruptcy. You don't have to unemployed or homeless to file bankruptcy. Often times, whether to file bankruptcy is a mathematical decision and the goal of your attorney should be to make certain your interests are protected as fully as possible so that bankruptcy can be a springboard used to jump start a new financial beginning

Source: http://financeautoposting.blogspot.com/2012/08/bankruptcy-myth-you-lose-your-property.html

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