People often find themselves in financial difficulty through no fault of their own. They may have lost their job or be struggling to pay unforeseen medical bills. Then they realize the only way to resolve their financial dilemma is by filing bankruptcy. There is a common misconception that although going through a Chapter 7 bankruptcy may eliminate debt, it will also place a debtor's assets at risk, but this is not always the case.
A series of exemptions have been introduced that are available for those filing federal bankruptcy that will cause certain assets, or at least a portion of the value of these assets, to be protected from the bankruptcy process. These exemptions differ slightly from state to state, and the exemptions that would be available in, for instance, Missouri would not be exactly the same as those available in Tennessee.
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In order for the exemptions to be claimed, the debtor's bankruptcy attorney would have to list them on the debtor's bankruptcy petitions and schedules. It is therefore recommended that debtors retain the best firm of bankruptcy lawyers possible so that they can take the maximum advantage of all allowable exemptions.
One of the more important exemption categories available in almost every state is the debtor's personal assets. The last thing that a debtor, going through a traumatic bankruptcy, would need is for items like his clothing, personal photographs and family bibles to be sold out from under him. In Missouri, clothing, textbooks, bibles and family pictures are protected up to a value of $1,000 and in Tennessee this same protection is available for up to $4,000. The personal property exemption allowed in Tennessee would, furthermore, also protect assets like cash on hand and monies held in bank accounts.
Further exemptions allowed in Missouri would include those relevant to the funds that were paid to a debtor from the sale of his real property, if this sale took place within one year before the date of his filing for bankruptcy. This exemption is, furthermore, over and above that relating to real estate owned by the debtor at the date of the bankruptcy. In this case a debtor can exempt up to $15,000 of equity provided that he is living in that house. Tennessee, on the other hand, allows a debtor to exempt $5,000 of the house's equity, $7,500 if debtors are filing jointly, only for the house that the debtor both owns and lives in.
Debtors living in Missouri can also claim exemptions on assets like automobiles, workers compensation benefits and qualified retirement plans like annuities and profit-sharing plans. Furthermore, those living in Tennessee, can also protect certain life insurance payouts, tools-of-trade and disability and unemployment compensation benefits. Debtors do not have to lose everything during a bankruptcy proceeding, and, indeed, if the available exemptions are applied correctly, they would lose only the bare minimum of their personal property.
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