Some people fear filing for bankruptcy because they think they will lose everything they own. This is far from the truth. Bankruptcy is a process intended to help people rid themselves of burdensome debt and get back on their feet. You should not fear that bankruptcy will leave you with nothing.
There are solid reasons why bankruptcy allows you to keep many of your possessions and perhaps even highly valued assets like a car. Nerdwallet explains how the bankruptcy process protects material possessions and other assets.
You have access to exemptions
Both state and federal bankruptcy law allows for filers to claim exemptions. This means you can exempt something you own from liquidation if it is important for your basic everyday living. If you need a vehicle to drive to a job, you stand a good chance of claiming the automobile as an exemption.
Keep in mind that exemptions vary by state, so New Jersey might not permit some exemptions that occur in other states. Additionally, federal and state exemption laws can also differ.
Creditors may not want certain assets
Your creditors will want to collect whatever money they can from you, but this does not mean they will sell off your television or your kitchen set. Many of your possessions might not be worth much or anything at all. Even if you have a non-exempted high-value item, another party might have a lien on it or you may still owe money on it, so other creditors cannot claim it.
You can keep assets in Chapter 13
Keep in mind that there are different kinds of bankruptcy. Chapter 7 bankruptcy is liquidation, meaning you may have to sell non-exempted property to pay creditors. However, if you file for Chapter 13 bankruptcy, you can avoid selling off property altogether. Instead, you will create a plan to pay off some of your debts over a period of three to five years.
Do not assume that the worst can happen if you file for bankruptcy. This process presents a variety of options to help people return to financial solvency without incurring major loss.