Bankruptcy can happen to any business regardless of its type and size. However, debtors must be mindful of the alternatives available instead of filing for financial failure. Chapter 7 is one of the alternatives that you can choose if you notice that your business needs some financial adjustments. If you will consider filing Chapter 7, most of your assets will be liquidated in order to reduce the amount of your debts.
Before filing for Chapter 7 bankruptcy, it is important to understand first the inclusion of this chapter. This chapter is also called as liquidation bankruptcy because the assets and property of the debtor are gathered and sold in order to pay most of the debts and the remaining amount of the debts is discharged. However, in filing for Chapter 7 there are exemptions in which some of the properties are protected from being sold such as your home.
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Homestead exemptions – The home is one of the assets that filers for Chapter 7 are concerned. Luckily, homestead exemptions protect the home of the filer, yet there are limits to the protected amount.
Automobile or car exemptions – Under Chapter 7 bankruptcy, the car of the filer is also protected. However, the federal and state laws have set certain amount of the value of the vehicle to be protected. In 2010, the capped amount for the vehicle exemption set by the federal law was $3,225.
Personal Property exemptions – There are different types of exemptions applicable for personal property. In fact, most of the personal properties are exempted from being sold. Examples include jewelry, clothing, appliances, home furnishings and many more. However, the law sets limit per item that will be applied to this exemption.
Wildcard exemptions – All the properties, assets or items that exceeds in the maximum value of other categories fall on this Chapter 7 exemptions. The debtor can impose wildcard exemption in order to protect other properties to end up in bankruptcy. The bad side is that not all state offers wildcard exemptions and the value is limited.
Even if your business is facing financial crunches, you need to be very careful in making your decision. If you think that you can still do things to save your business, then you should not file for bankruptcy. If there is no other option and you want to resolve the insolvency problem you may consider Chapter 7 bankruptcy, but make sure to understand the exemptions.
The Chapter 7 bankruptcy exemptions also depend on the tax of the filer. Likewise, the federal and the state law are the one establishing the exemptions. That is why if you do not have any idea about this chapter and its exemptions, the best thing to do is to hire a bankruptcy attorney. This will help you in familiarizing the law and how it can help you from bankruptcy.
Chapter 7 bankruptcy allows the filer to make a start after resolving all the debts. Through the exemptions the filer can start a new business while keeping certain properties. For more information: http://en.wikipedia.org/wiki/Chapter_7,_Title_11,_United_States_Code