The general public is often misinformed about the consequences for filing for Chapter 7 federal bankruptcy. People believe that, by filing bankruptcy, they lose the right to own any personal property and what they have will be taken away from them and sold in an attempt to raise money to pay off their creditors.
Now, while it is true that a court-appointed bankruptcy trustee's job is to try and find as much money as possible so that he can pay creditors as much as possible, this does not mean that the debtor loses everything that he owns. More and more people are forced into bankruptcy these days by circumstances beyond their control and it would benefit everyone if these debtors could think of the bankruptcy process as a positive experience set up to eliminate debt and not to deprive them of all rights to all personal property.
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In order to protect a debtor's personal property, certain rules have been set up that regulate what property he is allowed to keep, and these rules are known as exemptions. As bankruptcy law has developed slightly differently in each of the states, the exact exemptions that can be claimed by debtors differ from state to state. This is where the debtor's bankruptcy attorney can be of great assistance as, when bankruptcy lawyers complete their clients' bankruptcy petitions and schedules, it helps to have a thorough understanding of the allowable exemptions.
In view of the above, exemption rules in Arizona will be different from those in, say, Virginia, although, on the whole, they will cover the same groups of personal property. As worrying about losing a family home can destroy a family, homestead exemptions are offered in both states. In Arizona, the exemptions will protect equity of up to $100,000 in the home, mobile home or condo and the land it is on while, in Virginia, equity of only $5,000 is protected and $500 also goes to each dependent. Household furniture can also be exempted from bankruptcy proceedings and, in Arizona, this means up to $4,000 of furniture is exempt. Virginia exemptions, however, can total $5,000 and cover not only household furniture but also clothing and various personal effects.
Retirement plan monies also fall subject to the exemption rules but, while Arizona laws allow a debtor to keep the full proceeds of certain specific retirement plans, Virginia laws protect only the first $17,500 in these plans. Motor vehicles have also not been forgotten and, in Arizona, an exemption of $5,000 in value on any one vehicle can be claimed, and $10,000 if the debtor is disabled. Virginia, on the other hand, protects up to $2,000 in value on any one vehicle or $4,000 on two vehicles if a couple is filing jointly and both parties are on title for both vehicles. Other exemptions also exist in both states, like those that cover tools of the trade, life insurance policies, and certain unemployment compensation benefits, which proves that bankruptcy is not as tough as it seems.
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