Law & Legal & Attorney Bankruptcy & consumer credit

Rights in Bankruptcy

    • Bankruptcy is difficult but you still have rights.gavel image by Cora Reed from Fotolia.com

      The number of bankruptcies has doubled in the last decade, says MoneyCentral.msn.com. Changes in the bankruptcy laws combined with America's rising consumer debts have contributed to the problem. Bankruptcy is a long and complicated process, but the consumer still retains some rights. It is essential that you understand these rights to navigate the bankruptcy process successfully and achieve the best possible outcome.

    Property Rights

    • People usually file either Chapter 7 or Chapter 13 bankruptcy when their income and assets are not enough to cover their debt. With Chapter 7 bankruptcy the consumer asks the courts to stop all collection proceedings from the collectors. Under Chapter 7 assets can be used to cover some of the debt. Any amount of qualifying debt that remains after the assets are liquidated is discharged by the court. Chapter 13 restructures the consumer's finances for a fixed period of time, typically three to five years. An amount to be paid to creditors is decided by the courts. Property and other assets can be sold to cover portions of the unpaid debt. However, the consumer can file a petition with the court to exempt certain assets from liquidation. The creditors do have the right to challenge this, but if the court approves the consumer's petition then the exempt assets cannot be touched.

    Retirement Assets

    • Under section 522 (d) of the bankruptcy code, retirement accounts cannot be taken. Retirement pensions, profit and stock sharing options, 401k accounts, IRA accounts, tax sheltered annuities and trusts cannot be liquidated in bankruptcy proceedings. The consumer must add these to the list of exempt assets when she petitions the court.

    Automobile Protection

    • You have the right to $3,225 exemption for your car. If your equity, the value of the car after the outstanding loan balance is subtracted, is less than $3,225 then the car can be exempt. If the car is worth more, then other exemption categories can be applied to keep it. You also have the option of paying your trustee the difference to keep the car. Keep in mind that this figure is the federal exemption amount. Your state might have its own allowed exemption amount that could be higher.

    Household Goods and Furnishings

    • Under the Federal Bankruptcy code, you are entitled to an exemption of $10,775 for household goods and furnishings. You are also entitled to a $525 exemption for any particular item. Bankruptcylawyers.com states that household goods hold very little resale value. Although creditors may have the right to ask they be liquidated, they seldom do. Researching your state's exemption amount could prove advantageous as it could be higher than the amount set by the federal government.

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