Depending upon the type of bankruptcy that a person chooses to file for, he may be asked to sell off or liquidate his assets in order to pay off his creditors. The form of bankruptcy that requires liquidation is Chapter 7 bankruptcy, and for some debtors, relinquishing ownership of personal savings and possessions can be difficult. However, certain laws can allow New Yorkers as well as other Americans filing for bankruptcy to exempt certain property from liquidation.
For example, provisions of the federal bankruptcy code exempt retirement savings in some circumstances. This can be very important for individuals who, after filing for bankruptcy, still need a financial cushion on which to fall in order to care for themselves into the future. The applicability of the retirement savings exemption can depend on a number of statutory factors, and readers of this blog post are advised to consult with their legal professionals to determine if they are eligible to exempt their retirement accounts.
Other items of property can also be exempt during the bankruptcy process. A debtor's home may be protected, as may certain items of personal property such as engagement rings and heirlooms. However, due to differences in state and federal bankruptcy laws, individuals should not assume that these statements apply to their situations and should seek legal advice to ensure they know what property they can exempt in their particular bankruptcy cases.
The bankruptcy process generally does not require a filer to become destitute in order to satisfy his financial obligations. He may have to sell off some of his possessions, but exemptions can protect some types of savings accounts and other personal property. While bankruptcy can offer an individual a path to financial freedom, it does come at some cost, and individuals should always carefully consider the benefits and drawbacks of the process before filing.