Owning a business can be one of the most rewarding experiences. Although owning a business comes with a lot of benefit, it also comes with a big financial risk. Owners often put their “all” into the company they own, and this often includes equity from their home.
Debt can quickly become overwhelming, but thankfully there is a process that can help business owners and their families get back on their feet. We are talking about bankruptcy. There is often a misplaced fear that filing for bankruptcy means losing everything, but it is important to remember that the process is there to provide a fresh start.
It is true that Chapter 7 bankruptcy involves the liquidation of assets to satisfy debt. However, there are exemptions that help protect assets necessary to set up individuals for life after bankruptcy. In fact, Texas provides those that file for bankruptcy one of the best homestead exemptions in the country.
Other items that are often provided with this exemption protection are retirement assets and pensions, student financial aid, tools used in the trade or business and insurance. Wages or salaries are also protected during bankruptcy, often at 75 percent or more.
Personal property also receives a lot of leeway in bankruptcy proceedings. Things such as the furniture, clothing and cookware don’t often resell for a high value but cost a lot to replace. It might surprise people to learn that even bank accounts, deposits or other personal payments can be protected — albeit with certain dollar limits.
For other personal property, there is more value than just monetary value. Heirlooms are one such type of asset, and these can receive a level of protection during the process as well.
A bankruptcy attorney not only provides assistance for the technical bankruptcy requirements, but their understanding of bankruptcy exemptions can help maximize the possible protection of assets during the process.
Source: Forbes, “How To Bounce Back From Bankruptcy & The Loss Of Your Home,” Cameron Keng, Aug. 5, 2013