When your financial situation is a mess, you will likely pass through several stages on your path to a final decision. At first, you may believe that you can get caught up on your bills and avoid a filing. When bill collectors are harassing you constantly, however, and you are being threatened with foreclosure, repossessions, utility shut offs, lawsuits and more, you may have to take action quickly. The decision to declare bankruptcy is not an easy one; you may harm your credit for years and the thought that you allowed your finances to get in such a state can be demoralizing and embarrassing. Those concerns, however, might take a backseat to the thought of losing property with a filing. Every bankruptcy case contain the potential for losing property, but read on to learn more about how your concerns may be unfounded.

Understanding Exemptions

Bankruptcy exemptions often constitute a confusing aspect of bankruptcy, but they are actually pretty easy to understand once you look at them as a way to reduce the value of your property to keep that property from appearing so valuable to a bankruptcy trustee (the person who administers your case). For example, if your state allows you a $3,000.00 personal property exemption, you should value your personal property and then reduce that number by the $3,000.00. If you have less than that amount in personal property, you stand to lose none of it by filing bankruptcy. Every state has different amounts and types of exemptions, so be sure to concentrate on those in your state in particular.

Is Your Home Safe?

The potential for the loss of a home can be frightening. That possibility has caused many people to put off or reconsider filing quite often. When it comes to your home, most states provide a special type of exemption known as a homestead exemption. This amount is usually quite generous, and allows you to deduct from the value of the home. Remember, the value of your home is its appraised value, but any amount you still owe to the mortgage company is also taken into consideration. Additionally, the actual amount of your bankruptcy is taken into account. For example, the bankruptcy trustee is unlikely to seize a home worth $250,000 if your bankruptcy amount is less than $100,000.

Is Your Car Safe?

In many states, cars are lumped in with personal property and in others it is a separate exemption. In all cases, however, the way these exemptions work is similar to the homestead exception. The value of your car and how much you still owe on it are considered. Additionally, you may be able to leave your vehicle out of your bankruptcy filing entirely by reaffirming the car loan. With this, you promise to keep making your payments in return for keeping the car.

Speak with a bankruptcy attorney for more information.