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When filing a chapter 7 bankruptcy, a lot of people are scared that the court is going to take all of their property and sell it in order to pay off their debts. Afterall, ch 7 is known as liquidation. Luckily, the bankruptcy code has provided the federal government and individual states the ability to allow a specific amount of property to be exempt from being taken during the bankruptcy proceedings. These are called bankruptcy exemptions.

Each state has the ability to allow bankruptcy filers to choose the federal bankruptcy exemptions, or set their own exemptions. Numerous states allow filers to choose from the federal or state exemptions in order to best protect their assets.

When filing a chapter 7 bankruptcy, schedule C will list the exemptions you choose. Each exemption is for a specific piece or type of property, such as a homestead exemption to cover the equity you may have in your home, or an automobile exemption to cover the value of your car. Most exemptions are for things you need to survive daily, and are set for specific amounts. Any property you own that is not covered by an exemption, or is worth more than an exemption covers, is subject to being sold in order to pay off your creditors.

If you have a lot of property and are considering filing bankruptcy, it’s important to discuss your options with a local bankruptcy attorney as it may be better to file chapter 13 in order to save your property.