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Understanding the protections of bankruptcy exemptions

Bankruptcy is intended to provide protection and debt relief for individuals struggling with debt. The idea of bankruptcy may create anxiety concerning personal property but in most instances, the filing party is able to keep most of their personal property. Bankruptcy exemptions exist for certain types and categories of property through both Chapter 7 and Chapter 13 bankruptcy which are the two types of personal bankruptcy. In general, some types of property are exempt from bankruptcy.

There are both federal and state bankruptcy exemptions to protect filing parties and their personal property. The homestead exemption protections up to $500,000 in the equity of a home that is used by the filing party as a primary residence. Important exemptions are also provided for cars, retirement accounts, "tools of the trade" that are used for employment purposes and other types of personal property as well. It is important to be familiar with the different exemptions and to understand how they can be utilized for the benefit of the unique circumstances each filing party finds themselves in.

In general, Chapter 7 bankruptcy is a liquidation bankruptcy that allows the filing party to liquidate assets to repay debts, however, this process is subject to the exemptions mentioned. Alternately, Chapter 13 bankruptcy is a bankruptcy option that allows a filing party with a reliable source of income to reorganize debt into a manageable repayment plan to repay the debt and enjoy debt relief. Both types of personal bankruptcy allow the filing party to enjoy a fresh financial start.

The idea of bankruptcy may cause concerns so it is important to be aware that there are options to help protect a home, car or other personal property. The bankruptcy process can also sometimes be complex so it is important to thoroughly understand which options are best to help protect the filing party and help them enjoy debt relief.

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