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December 11, 2020

Why Do Bankruptcy Exemptions Matter?

Posted in Personal Injury Attorney

Personal Injury Lawyer

If you don’t earn much income, you may be eligible to file for Chapter 7 bankruptcy, as opposed to Chapter 13 bankruptcy. While virtually anyone is permitted to file for debt relief under Chapter 13 of the Bankruptcy Code, only those who earn a minimal amount of income are permitted to file for debt relief under Chapter 7. Chapter 7 bankruptcy protection is reserved for those whom the court deems least able to repay their debts over time due to their low-income eligibility. Income restrictions are put into place for Chapter 7 bankruptcy because this form of debt relief is particularly generous and the courts don’t like to deny creditors their right to collect unless they have to.

The Chapter 7 bankruptcy process does not require that bankruptcy filers repay their eligible debts before a discharge order can be entered in their name, as a Memphis, TN bankruptcy lawyer like one from Darrell Castle and Associates, PLLC will tell you. This process stands in contrast with the Chapter 13 bankruptcy process wherein filers must make manageable monthly debt payments for 3-5 years to partially repay their obligations before any remaining balance of their eligible debts can be discharged. Essentially, Chapter 13 filers have to repay a portion of their debt over several years before they receive any debt relief, whereas the eligible debts of Chapter 7 filers are forgiven without any repayment requirements.

Chapter 7 Bankruptcy Exemptions – An Introduction

In order to make sure that the Chapter 7 bankruptcy process is not unreasonably unfair to creditors, Chapter 7 filers are required to make a list of all the property they own. If any of that property is particularly valuable and “non-exempt,” the trustee assigned to a filer’s case may sell that property and pass the proceeds from the sale along to the filer’s creditors. Bankruptcy exemptions allow filers to flag certain property (as determined by state or federal law) in order to keep it safe from risk of sale by their trustee. Most of the time, eligible exemptions cover most, if not all, of a Chapter 7 filer’s property. As a result, most Chapter 7 filers don’t risk having their property sold unless they own luxury property not covered by standard exemptions.

Legal Assistance Is Available

If you are struggling with debt and are interested in exploring whether bankruptcy may be a good fit for your financial situation, schedule a consultation with an experienced bankruptcy attorney today. Depending on the kinds of debt you owe and your income level, you could be in a position to eliminate a significant portion of your debt in as few as 90 days once a Chapter 7 bankruptcy petition has been submitted to the court. Alternatively, you could be in a position to restructure your debt under Chapter 13 to make repayment of that debt much more manageable. Either way, considering bankruptcy as a debt relief option can help you to regain strong financial footing so that you can do less worrying and more building for the future moving forward. Our legal team would be happy to provide you with personalized feedback about your options in a consultation setting. We look forward to speaking with you.

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