Understanding property exemptions in bankruptcy
On behalf of The Rollins Law Firm posted in Bankruptcy Exemptions on Thursday, June 27, 2013.
Mississippi residents who are struggling with debt have a number of options for debt relief, including debt consolidation, credit counseling and working with creditors to arrange for lower interest rates and payment reductions. For those who don't make enough money to pay back their debt and manage living expenses, they may want to consider filing for bankruptcy. There are a number of benefits in filing for bankruptcy: People's debts are discharged, and they are no longer required to make payments towards their debt.
However, individuals should not file for bankruptcy unless they understand exactly what is involved. While filing can help people get back on their feet, it is important to note that sometimes assets are used or liquidated to help pay back creditors before debt is discharged. Most states have property exemption laws that determine what assets are protected, and individuals should be familiar with these before filing for bankruptcy.
If someone files for bankruptcy without being aware of what property is exempt, they could end up losing some of the contents of checking or savings accounts. It is also important to note that assets must not be moved around before the filing process is completed. For example, 401(k) accounts are exempt, but if they are cashed out and the proceeds put into a bank account, those funds could end up being used for debt repayment.
For someone to receive the most benefit possible from filing for bankruptcy, it is important they understand state laws and how they could impact their finances. A lawyer could explain what is involved in the filing process and help someone understand what to expect.
Source: Fox Business, "Will my 401(k) be Safe if I File for Bankruptcy?", Justin Harelik, June 19, 2013