A personal bankruptcy filing can help address overwhelming debt and aggressive collection efforts. Bankruptcy can delay legal action, including foreclosure and creditor lawsuits. People may be able to discharge some of their debts.
However, there are obligations imposed on the person filing for bankruptcy. Some people have to make structured payments for years to qualify for a discharge of their eligible debts. Others may need to liquidate or sell off some of their property to repay their creditors before they qualify for a discharge of their debts. Losing property can worsen the economic circumstances of those already struggling with debt.
Do people need to worry about the forced liquidation of valuable property when they file for bankruptcy?
Liquidation often isn’t necessary
Many bankruptcy cases do not require any liquidation of personal property. Individuals filing for Chapter 13 bankruptcy do not need to worry about asset liquidation at all. Only Chapter 7 bankruptcy may require asset liquidation.
Even then, the filer can protect many of their resources using exemptions. Exemptions allow people to preserve retirement savings, home equity and other valuable property. There are exemptions outlined in federal bankruptcy statutes, but people filing in Florida must use state-specific exemptions rather than the federal ones. Most people pursuing Chapter 7 bankruptcy do not have to liquidate any of their resources to be eligible for a discharge.
Reviewing personal holdings with a skilled legal team can help people determine if Chapter 7 bankruptcy is a viable option. Asset liquidation rules intimidate many people, but most filers can protect their resources. People who understand the basics of asset liquidation during bankruptcy can make informed choices about their options for debt relief.