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Will I lose everything if I file for Chapter 7 bankruptcy?

Many people in New Hampshire experience financial challenges at some point of time. Sometimes, these challenges are temporary and can be absorbed into a person's budget. However, other times the challenges are so great or so long-lasting, that a person is simply unable to cope with them. People in dire financial straits may have heard that one way to address their many debts is through filing for Chapter 7 bankruptcy. However, they may be concerned that they will lose all their property in the process and will be left with nothing.

Fortunately, this is not true. While Chapter 7 is a liquidation bankruptcy in which a person's assets will be sold to pay off their debts, there are many federal and state exemptions to the liquidation process that will allow debtors to keep certain assets. In this way, the government recognizes that a person who files for bankruptcy needs to retain at least some assets, so they can make a fresh financial start.

In New Hampshire, debtors can choose whether to take advantage of state exemptions or federal exemptions. This post will focus on federal exemptions. These exemptions are adjusted every three years, and the next set of changes will take place in 2019.

One federal exemption is the homestead exemption. Currently, debtors can retain $23,675 in equity in their primary home. This exemption does not apply to a person's second home or investment property. Debtors can also retain $3,775 in equity in a motor vehicle. In addition, debtors can keep $1,600 in jewelry. $12,625 in household goods can also be retained, although this is capped at $600 per item. Up to $2,375 in trade tools is exempt, and health aids, tax-exempt retirement accounts (except for IRAs) and unmatured life insurance of any value are exempt. There are other federal exemptions as well.

So, a person who files for Chapter 7 bankruptcy will not lose everything. There are many federal exemptions they can take advantage of, or they can take advantage of state exemptions. This way, people who file for bankruptcy can keep the resources they need to move forward into a better financial future.

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Whether you have a family law issue, an estate planning question or are considering bankruptcy, I can help you find a sustainable solution that provides relief and hope. Schedule your consultation at my Nashua, New Hampshire office today by calling 603-635-4149 or by sending us an email.

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