Bankruptcy can be an extremely stressful process for a debtor to have to undergo, with worries about their current and future financial status dominating their thoughts, as well as potential concerns about what future consequences this action could have. Those who are going through this difficult process shouldn’t have to be burdened with worrying about anything else at this time. That’s why we have created the following list of useful tips for helping debtors avoid some of bankruptcy’s potential costs.
One of the easiest ways to reduce the costs of bankruptcy is to file for a bankruptcy fee waiver. This resource from the United States Courts website provides information on applying for these waivers in federal courts. For state courts, you may have to seek out the resources available in your state.
There are also several different exemptions that may be available for those filing for bankruptcy. Cornell has an extensive list of many of these exemptions, but for a brief breakdown of some of the most popular ones, we’ve compiled the following list of 5 bankruptcy exemptions you should know about:
- The Homestead Exemption – many individuals undergoing bankruptcy proceedings are worried about whether or not they will be able to keep their home, particularly if they’ve invested significantly in the costs of their home. Fortunately, the homestead exemption allows homeowners to exempt a certain amount of equity (the difference between the value of their home and what is owed on their mortgage) on their home in bankruptcy proceedings. Depending on the amount of equity which the homeowners have, they may even be able to keep their home throughout the bankruptcy process.
- Motor vehicle exemption – much like the homestead exemption, debtors filing for bankruptcy can exempt a certain amount of equity that they have in their vehicle. That way, even if it is sold during the bankruptcy process, the debtor will be able to keep at least some of the amount of the value that they had invested in the vehicle.
- Wildcard exemption – some states have created so-called “wildcard” exemptions that can be used on property which would not otherwise be exempt from the bankruptcy processes. For example, if a family heirloom is valued at less than the total amount of the wildcard exemption, the individual could use the exemption to protect that property.
- Jewelry exemption – many states allow individuals to exempt jewelry up to a certain amount of value in their bankruptcy filings.
- Retirement account exemption – all states allow individuals to exempt their tax-exempt retirement accounts from bankruptcy filings, up to significantly high values.
These are some of the most popular bankruptcy exemptions available for those going through this difficult time. However, the specific details of these and other exemptions can vary considerably from state to state, and in order to fully understand your rights and options in this situation, you should contact a bankruptcy lawyer to discuss your case in detail and determine what your best course of action may be.