One of the most common questions we get, as Ontario consumer bankruptcy lawyers, is "Which of the things I own are protected during a bankruptcy?" The Wall Street Journal's Smart Money magazine gave a partial answer to that question Nov. 17 with an article outlining the basics of bankruptcy exemptions and how they might affect people in different states. As the article discusses, bankruptcy exemptions depend in large part on what state you live in, because each state has a different list of exemptions that can vary widely across the country. But by choosing the right kind of bankruptcy, and enlisting the help of an experienced personal bankruptcy attorney, filers can make the most of the exemptions given to them by the law.
The article takes a close look at some of the high-cost properties that could be protected during an individual or married couple's bankruptcy. These include homes, cars, retirement accounts, life insurance policies and college savings accounts. With homes and cars, people with no equity at all are actually in a good position in bankruptcy. When you have no equity, creditors have nothing to claim, which means a bankruptcy trustee will not sell the home or car to pay your debts. If you can continue making payments (which often means a loan modification through Chapter 13 bankruptcy), you can hold on to the property. That's also true if the equity you have in the property is less than or equal to the exemption in your state. Retirement plans and term life insurance policies are generally safe, the article said, although whole-life insurance policies are not because they are considered investments. College savings plans held for someone else are exempted entirely if they are more than two years old; if they are not, up to $5,000 is exempted.
As you can see, bankruptcy exemptions are complicated and depend a lot on the specifics of each individual case. But our Redondo Beach personal bankruptcy attorneys want clients to take away two important lessons. One is that bankruptcy will not leave them in poverty. It is not an easy decision and it will likely mean losing some assets, but it is designed to leave filers with enough assets to support themselves. Even more importantly, we want potential clients to realize that in some situations, it makes more sense to file for bankruptcy than to spend money from assets that would be protected in a bankruptcy. If you know or suspect that filing for bankruptcy is inevitable, you are better off keeping your retirement account and your kids' college savings than you are spending them in a futile attempt to stave it off. This is a hard thing to acknowledge, but it's necessary if you want to give your family the best possible foundation when your debts are discharged and it's time to start over.
If you're considering filing for bankruptcy in California, consider contacting Howard Law PC for a free, confidential consultation on your options. We sit down with all potential bankruptcy clients, review their situations and do the math to determine whether bankruptcy is the right choice for them. If it is, we stand by our clients through every step of the process, from the initial credit counseling to the day their debts are discharged. Filing for bankruptcy is emotionally difficult as well as legally and financially complex, which makes it very important to have experienced eyes looking over your case. Our Yorba Linda individual bankruptcy lawyers help make sure our clients don't make an honest mistake or well-intentioned omission that could complicate their cases, or even have them thrown out. We want every client to leave with the financial tools to succeed as they rebuild their financial lives.
Howard Law offers free case evaluations, so you can talk to us about your situation with no risk or obligation. To learn more or set up a meeting, call us toll-free at 1-800-872-5925 or send us a message through our website.