Some Colorado residents may be considering filing for bankruptcy to eliminate the burden of debt, but they are afraid to take the first step. Worries that the bank might take away certain assets might be preventing you from seeking debt relief.
Chapter 7 bankruptcy does not require a repayment plan like Chapter 13. In exchange for debt relief, some people may have to allow the bank to sell assets to pay for the unpaid sum in part or entirety. This process is called liquidation. Although it sounds scary, most people keep almost everything, including their house and car.
Exemptions
You won’t be left with nothing after filing bankruptcy. The law protects many assets from liquidation, which are exempt by law. Because the purpose of bankruptcy is to help you get back on your feet, the bank will not take property such as your car and home.
However, the law limits exemptions to specific value amounts in different categories. For example, if you have a wedding ring worth $600, you can guard it from liquidation by counting it toward the $1000 value of exempt jewelry.
Hiding assets from liquidation
Although you might have property that is not exempt, but you are afraid to lose, you cannot hide it or give it to a friend temporarily. This is a form of fraud that can tangle you in a major legal crisis as well as obliterate any chance you have to receive debt relief. To avoid these consequences, be sure to report your assets to the trustee honestly.
Liquidation often allows people to keep furniture, clothing, a car, the home, sentimental heirlooms and other property. To know what you would be able to keep and what you might lose, consult with an attorney familiar with Colorado’s bankruptcy laws.