At the Bankruptcy Law Center, we have helped many California residents successfully file for bankruptcy and start a new chapter of their lives. When clients meet with us, one of their main concerns is about losing their property. There is a common myth or misconception that the court will take everything you own, including your home, car, and even your furniture, when you file for bankruptcy. In truth, in most bankruptcy cases filed by individuals, the court does not take most of their property. Instead, applicants can use bankruptcy exemptions to exempt an asset from being taken by the bankruptcy court.

How Do Bankruptcy Exemptions Work?

When an applicant files for bankruptcy, the bankruptcy court appoints a trustee. The trustee will review the person’s property. When appropriate, the trustee has the authority to sell the assets for the benefit of the person’s creditors in a Chapter 7 bankruptcy. However, debtors who submit a bankruptcy petition have the right to protect their assets. Debtors can claim that certain assets are exempt from the bankruptcy process to protect them. 

You may be wondering how much property you can exempt in California. The type and amount of property you can exempt is generally determined by the state in which you live. In California, many debtors can use exemptions to keep their homes, automobiles, and some of their other assets. Remember, exempting property does not mean that you will own the property free and clear of any debt. 

For example, if you owe money on your car loan or through a mortgage on your property, you will still be required to keep paying those bills after your bankruptcy to keep the property. Typically, this process is done through a reaffirmation agreement. The debtor signs an agreement agreeing to keep paying for the collateral after submitting the bankruptcy petition.

What if Property Cannot be Exempted?

When a person filing for bankruptcy owns more property than he or she can exempt, it is crucial that the debtor work with a lawyer to develop a strategy. If the debtor is filing for a Chapter 13 Bankruptcy, they can work with a lawyer to formulate a plan to pay creditors over a three-to-five-year time frame. Filing for a Chapter 13 Bankruptcy as an individual does have certain advantages. 

Instead of your non-exempt assets being liquidated to pay your creditors, you will be able to create a repayment plan and keep your assets. As long as you keep making your payment, you will be able to keep your assets. While you are making payments, you will also enjoy the protection of the bankruptcy court.

Discuss Your Case With a San Diego Bankruptcy Lawyer

If you are curious about filing for bankruptcy but you are afraid of losing your property, we recommend scheduling an initial consultation. At the Bankruptcy Law Center, we will walk you through your options and carefully listen to your goals to create the best strategy possible. Contact us today to schedule your initial consultation.