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Bankruptcy can be scary, especially if you're filing for Chapter 7 bankruptcy, which allows your trustee to liquidate personal assets to pay off your debt. This doesn't mean that Chapter 7 bankruptcy can't help you; in fact, liquidation can help businesses and individual escape the burden of overwhelming debt.

If you filed Chapter 7 bankruptcy or are considering a petition, you've probably wondered, "Will I lose all of my property?"

The short answer to this question is, not necessarily; most people are allowed to keep specific items during the liquidation process. These items are called exempt property. Bankruptcy exemptions are listed in 11 USC §522, "Exemptions." Examples are:

  • Personal injury awards
  • Welfare, social security, unemployment, and other public benefits
  • Unpaid wages
  • Trade tools, depending on value
  • Home equity (partial)
  • Pensions
  • Jewelry, depending on the value
  • Appliances
  • Goods and furnishings, if necessary
  • Clothing
  • Automobiles, depending on value

Bankruptcy is designed to give debtors a fresh financial start. Starting over doesn't always mean that you have to start from scratch, which is why the United States federal bankruptcy code allows these exemptions.

"How are Chapter 7 exemptions determined?"

Automobile Exemptions – You can protect your car from liquidation if it is worth less than a specified amount of money. State laws vary, but the federal cap for automotive exemption is $3,225. The Missouri cap for car exemptions is currently placed at $3,000.

Personal Belongings – Some of your personal belongings are protected by Missouri bankruptcy exemptions. According to Missouri Revised Statutes, §513.430(1), household items, books, appliances, musical instruments, and clothing are exempt from liquidation, but only up to $3,000.

House Exemptions – Your house is exempt from liquidation up to $15,000, according to Missouri Revised Statutes, Chapter 513 §513.430(6). This is called a "homestead exemption" and does not apply to mobile structures, which are capped at $5,000 under state law.

Tools of the Trade – The term "tools of the trade" refers to any item, such as a musical instrument or computer, used for work. In Missouri, there is a $3,000 cap for items classified as tools of the trade. By law, books, machinery, trucks, boats, farm animals, and equipment may be tools of the trade.

Non-Exempt Property

Some property is not exempt from Chapter 7 liquidation. In other words, the debtor can be certain that he/she will not be able to keep some possessions. These include second vehicles, musical instruments, collections of coins or stamps, cash, bonds, stocks, second homes, and family heirlooms.

"Is Chapter 7 bankruptcy right for me?"

Chapter 7 bankruptcy isn't right for everyone, but it is a viable option for many individuals. If you are facing an unmanageable burden of debt in Missouri, contact Adams Law Group today. We can help you understand your legal rights and options. Every case is different. Our Saint Peters bankruptcy lawyers can help you determine which form of debt relief is right for you, so call our office and schedule a free consultation regarding your case.