Many people fear filing for bankruptcy will mean surrendering their possessions. But one of the most attractive features of bankruptcy is that it can legally protect assets from creditors, thanks to a long list of exemptions.

Now, if you’re filing for Ch. 13 (also known as debt adjustment) you probably won’t need to worry about exemptions. Because you will be paying off your debts under a proposed Ch. 13 repayment plan, you’ll gain automatic protection against repossession.

Of course, sometimes repayment isn’t an option. Ch. 7 bankruptcy (otherwise known as liquidation) is usually the best choice when you don’t have major assets – like a home – to protect from creditors. On the positive side, you won’t have to worry about making payments and you can usually wipe out your debts quickly. However, you will sometimes be required to give up assets in exchange for the discharge of these debts.

Fortunately, each state has its own unique set of exemptions – items that are legally protected from liquidation because they’re considered necessary.

For example, in Illinois (as of January 2009) you can currently exempt up to $15,000 of the equity in your house. What does that mean exactly? If the current resale value of your home minus the amount left on your loan is less than $15,000, your house is safe.

So let’s say your home is worth $150K and you still owe $140K. That means you’ve paid $10,000 into your house – that’s your equity. Since it’s less than the $15,000 limit, you can keep your home as long as you continue paying the mortgage.

However, if your state’s exemption limit doesn’t cover your equity, it’s possible that your bankruptcy trustee could liquidate – i.e., sell your house – to raise money for your creditors. Now, this doesn’t necessarily mean you will lose your home. If you find you’re eligible to file for Ch. 13 instead of Ch. 7, you can work out a repayment plan instead of liquidating – meaning your house will still be exempt from foreclosure.

Whatever your situation, getting a professional opinion will ensure you find a debt relief plan that is as pain-free as possible.

Call DebtStoppers today at 800-440-7235 or sign up for our free one-on-one debt analysis to learn how bankruptcy can help you get a fresh financial start.

In the meantime, here’s a quick summary of the most common exemptions in Illinois and Georgia. By no means is this completely comprehensive – the actual list is quite long and subject to change. The following is current as of January 2009.

In Illinois, you’re guaranteed to keep:

• Property up to $15,000 equity
• Vehicles up to $2,400 equity
• 85% of your wages (though it’s possible that a bankruptcy judge can allow you to keep more)
• Most personal property, such as household goods, clothing, tools of the trade (stuff required for your job), books and family heirlooms like photos
• Money owed to you, such as unemployment, workers’ comp, disability, alimony, child support or social security

In Georgia, you can keep:

• Property up to $10,000 equity
• Vehicles up to $3,500 equity
• At least 75% of your wages (again, a bankruptcy judge can adjust this amount)
• Most personal property (similar to Illinois)
• Money owed to you, such as unemployment, workers’ comp, disability, alimony, child support or social security

Again, the complete state exemption lists are much longer. A professional bankruptcy attorney can evaluate your individual situation and identify all the exemptions you will be able to take if you file for bankruptcy.

While you might find the rules for exemptions confusing, keep in mind that most people who file for Ch. 7 don’t lose any property at all, as most of their belongings are deemed necessary.

There’s one more thing to keep in mind. To qualify for a state’s exemptions, you need to have lived in the state at least two years prior to filing for bankruptcy. If not, you might be able to claim exemptions for the state you previously called home, depending on how long you lived there.

Confused? You’re not alone – the laws surrounding bankruptcy are complex. Fortunately, our professional bankruptcy attorneys are used to deciphering complicated bankruptcy laws so you don’t have to!

Find out today if bankruptcy can rescue you from the shadow of debt and put you on the path to a brighter financial future. Call DebtStoppers now at 800-440-7235 or sign up for a free personal debt analysis in just seconds online.

It’s understandable to be concerned about your belongings. But remember – if you’re in debt, there are zero exemptions if you don’t take action.

Bankruptcy, on the other hand, can stop repossession in its tracks. Not only that, but it will eliminate debt so you can keep your assets not just now, but well into the future.