When you decide to declare bankruptcy, there are many choices you will be making, from choosing what process is best for you to which possessions you may have to part with in order to clear your debts. As such, your assets play a major role in almost any type of bankruptcy, so understanding how to handle and protect them as much as possible can offer you peace of mind as you move through the different stages of the proceedings.
1. Choose a Method
One way to possibly protect your assets more effectively during bankruptcy is to choose a method that does not include their liquidation. Chapter 13 can provide you with this kind of protection, as unlike Chapter 7, your assets are not collected and liquidated to pay off your creditors. Instead, your debt is reorganized and you are offered a payment plan that usually gives you up to 5 years to clear your debt. The type of bankruptcy you choose is a personal decision, but Chapter 13 may give you more control over your existing assets.
2. Examine Exemptions
If you choose Chapter 7 bankruptcy as a means of clearing your debt more quickly, then you may still be able to keep some of your possessions. There are exemptions at both the state and federal level, and the court-appointed trustee who will oversee your bankruptcy can help you understand which items you may be able to keep, based on their current value. In most cases, if the total value of a possession is less than the amount of an exemption, then it cannot supply any money toward your payments and you will probably be allowed to keep that item.
3. Declare Job-Related Assets
If you are currently employed but your debt eclipses your income, bankruptcy may be a solution. If you choose Chapter 7, you may be allowed to keep assets that allow you to retain your current employment, such as your vehicle. If you work remotely, you may also be allowed to keep home office equipment. Items that are necessary for daily living, such as appliances and everyday furniture, may be exempt from liquidation as well.
4. Be Honest About Your Assets
While bankruptcy can be a frightening ordeal if you do not have all the facts, it is never a good idea to try and hide assets by signing them over to other people or denying you own them. Being honest with your trustee throughout the proceedings is a sign of good faith that you are doing all you can to pay off your creditors fairly.