Misinformation about bankruptcy prevents some people from filing despite their overwhelming financial challenges. Many people believe that bankruptcy could haunt them for life. The reality is that the law limits how long the credit bureaus report a previous bankruptcy. After a decade, lenders and employers should no longer see the bankruptcy discharge when reviewing a credit report.
Others fear Chapter 7 bankruptcy, in particular, because it sometimes requires asset liquidation. The idea that a person could lose their home, retirement savings and other assets could leave them trapped in a cycle of slowly growing debt and minimum monthly payments. Thankfully, most people pursuing Chapter 7 bankruptcy can protect most, if not all, of their property.
There are multiple bankruptcy exemptions available
If people had to sell off or liquidate all of their assets to qualify for a bankruptcy discharge, very few people would seek legal relief from their debts. Additionally, the bankruptcy process could potentially worsen people’s financial circumstances.
Bankruptcy exemptions allow people to protect some of their property so that they can rebuild after bankruptcy. Texas has exemptions that protect acres of real property, retirement savings and personal assets.
People filing for Chapter 7 bankruptcy in Texas can even choose to use federal exemptions rather than Texas exemptions. The type of exemption that they use may depend on the property that they need to exempt, as the assets that are eligible for protection are different at the federal and state levels.
Protecting certain property can make bankruptcy more beneficial for individuals dealing with high levels of debt. People who may qualify for Chapter 7 bankruptcy often need help understanding the different exemptions that they can claim and choosing between state and federal exemptions, and that’s okay.