Although you may have heard that your assets and funds are at risk in bankruptcy, this statement is largely misleading. It is true that you will be required to list your assets, income, and fund accounts as part of your bankruptcy filing, but that does not mean that you will be subject to giving them up for debt satisfaction.
In fact, there are bankruptcy laws that can protect much of what you consider essential and valuable for your daily living.
What Is Protected?
Each state is different when it comes to bankruptcy exemption laws, but even the federal bankruptcy law allows for a wider range of protection than you may think. First, your income is used for debt repayment only to the extent that your disposable income level warrants it. It other words, the amount you may be required to repay is based on your overall financial picture and would never exceed an amount you can realistically afford.
Second, if the court does allow some of your assets or funds to be liquidated they are typically limited to extraneous or luxury items, not your essentials. For example, under the federal exemption you are allowed to keep up to $10,775 of personal property. This can cover items from clothing, furniture, household goods and the like. Life insurance policies, child support benefits, Social Security, unemployment, veteran and retirement account (up to $1,095,000) benefits are all protected under bankruptcy exemption laws. Funds that may not be protected are inheritance benefits, some tax returns, corporate bonuses and cash gifts.
Depending on your state of residence, you may be able to protect more of your property and funds under a state exemption laws. Consult a Tampa bankruptcy lawyer regarding Florida bankruptcy exemption laws.