Filing for Chapter 7 bankruptcy may allow you to reduce or eliminate credit card balances, medical bills and other types of unsecured debts. In some cases, you may be able to do so without losing a home, car or other property. Alternatively, the law may allow you to keep the equity that you accrued in a home, car or other asset.
Overview of the homestead exemption
A homestead exemption allows you to retain at least a portion of the equity that you have built up in your home after filing for Chapter 7 bankruptcy protection. State law allows you to retain up to $3,000 while the federal exemption allows you to keep up to $20,000. The type of exemption that you are allowed to take may depend on where your home is located or other factors relevant to your case.
A wildcard exemption may be available
The wildcard exemption may make it possible to protect additional equity in a home or car. It may also make it easier to protect personal items such as furnishings, tools or other assets that might not fit under any other category. As a general rule, you are allowed to keep clothes or other items that are either basic necessities or are not considered to have significant market value.
Filing for bankruptcy may be an effective way to obtain a stronger financial future. In addition to potentially discharging debts, you may also obtain an automatic stay of creditor collection activities. After obtaining the stay, creditors cannot contact you about your debts or take actions to obtain what they are owed. This may provide you with enough leverage to obtain a favorable outcome in your case in a timely manner.