Debt can be a significant source of stress for those who struggle with it. There can be calls from creditors, threats of foreclosure and difficulty paying for life’s necessities. Luckily, the US government offers a way to escape from that: bankruptcy.
Chapter 7 is one of several methods of filing for bankruptcy. This method pays off debts by selling your assets and using the proceeds to repay those to whom you owe money. People who can’t afford to reorganize their debt, as is done in Chapter 13, can find relief quickly since the process discharges all eligible debt.
After hearing that Chapter 7 requires liquidating what they own, many people are understandably worried about what they’ll have to give up. While it is true that you can’t keep everything you own, you don’t have to give up everything either.
Personal allowances during Chapter 7
The government realizes that people need to be able to start again after filing for bankruptcy, which is why they allow people to keep certain things. Things that are generally exempt from being sold are:
- Clothing: The court may scrutinize designer or luxury clothing, but you won’t have to give up the shirt on your back. Anything that seems reasonably necessary will likely remain yours to keep.
- Jewelry: Wedding rings and other pieces of jewelry can have enormous sentimental value. This unique connection is one of the reasons why there is an exemption of up to $1,000 for it.
- Public Assistance: Money that came directly from the government to support everyday living is exempt from the bankruptcy process.
- Home Equity: Even if you’re filing for bankruptcy, you can still claim a homestead exemption for up to $50,000 in the state of South Carolina.
Various other allowances can apply in specific situations as well. Bankruptcy is a big decision, so it’s essential to look closely at the benefits and drawbacks of filing.