When people think about bankruptcy they often find themselves wondering what they will lose. Though some types of bankruptcy, such as Chapter 7, may require a debtor to liquidate, or sell off, assets in order to satisfy outstanding debts, the law does seek to protect bankruptcy filers from financial ruin. This is why bankruptcy can be such a powerful tool to reclaiming financial freedom and taking hold of a new start.
For example, there are several types of financial benefits that cannot be affected by the bankruptcy process. Amongst these are Social Security benefits, unemployment benefits, veterans’ benefits, disability benefits, spousal support, an award from a crime victim’s reparation law, a portion of compensation recovered via a wrongful death lawsuit if the filer was the deceased’s dependent, and some retirement funds, just to name a few.
So, what does this mean to those considering bankruptcy? It means that they need to fully assess their situation to determine how bankruptcy may benefit them. Debts and assets should be thoroughly analyzed, and all bankruptcy exemptions should be addressed to see if they apply. This is critical, as exemptions could mean the difference between finding a fresh financial start and finding difficulty at the end of the bankruptcy process.
The bankruptcy code is extremely complex. Yet, failing to fully understand and utilize it could leave thousands of dollars on the table. Those who are considering whether bankruptcy is right for them should thus think about discussing the matter with a legal professional who can help them adequately assess their situation.
Source: The Legal Information Institute, “11 U.S. Code § 522,” accessed on Nov. 2, 2015