The decision to file for bankruptcy protection of any kind is not one that should be made lightly. People generally decide to pursue this option after careful consideration of the possible alternatives as well as what makes the most sense for their financial future.
Another factor that should not be overlooked if you are considering bankruptcy is what assets you may or may not be able to protect. Wanting to keep certain assets could be the determining factor in whether you file for bankruptcy and which type of bankruptcy you will pursue.
There are many exemptions when it comes to bankruptcy. These are assets and items that will not be liquidated during the process of repaying creditors. Generally speaking, these exempt assets include those that are a living or work necessity.
However, the bankruptcy courts likely have a different opinion on the word "necessity" than you have. Unfortunately, many items important to you will typically be considered non-exempt. This could include family heirlooms, investment and bank accounts and non-essential homes or vehicles.
On the other hand, there are assets you may be able to keep even if you file Chapter 7 bankruptcy. Generally speaking, exempt assets would include your home, primary vehicle (up to a certain value), retirement accounts, some jewelry, clothing and household goods as well as any tools that are required for you to do your job.
These are not hard-and-fast rules, however. For example, what you may consider to be a necessary item for work may not be considered as such by the courts. In order to avoid the surprise of having to give up a particular asset or assets, it can be crucial to thoroughly understand what to expect when it comes to your exemptions.
However, this is likely the first time you are in the position to be considering bankruptcy which means that you may not have a full and accurate picture of the process. Without knowing what to expect, how to prepare or how the courts work, you can be at a distinct disadvantage and quickly overwhelmed. However, working with an attorney can help you be prepared and avoid costly mistakes.
Source: FindLaw.com, "Exempt vs. Non-exempt Property Under Chapter 7," accessed on Dec. 4, 2015