What Assets Can Be Taken In Bankruptcy - Does Filing Bankruptcy Mean You Lose Everything?

                                                                                         

Bankruptcy is a drastic step, and one usually taken by people who feel they have no other alternative. When you are declared bankrupt you essentially lose control of all your assets. In the US there are certain modest personal exemption levels for different types of asset, intended just to cover the essential things you need to get by. Anything above these levels will be liquidated to raise money to pay off your creditors. What these exemption levels are is governed by state law and therefore varies from state to state.

In the UK full control of your assets is transferred to your trustee, with the only exceptions usually being what are classed as essential items, which includes clothes, bedding, basic items of furniture and any equipment you need to carry out your work. This can also include one vehicle if it is essential to your income. Even if some items are essential, you could still find them being sold and replaced by cheaper alternatives if they are particularly valuable.

By filing bankruptcy you basically lose everything, and there are lasting consequences in terms of your credit, future employment and reputation. It is a very serious step to take and one that should not be taken lightly. While bankruptcy proceedings will sometimes be started by your creditors, if you are thinking of filing for bankruptcy yourself, you need to ensure that you are fully aware of, and have properly considered, the possible alternatives.

To be looking at bankruptcy we will take it as read that you have a very serious amount of debt and you do not have the means to pay if back. In this situation, some people think that means their only option is to file bankruptcy, but it isn’t. You are probably beyond the reach of a debt management plan or debt consolidation, but there are more radical solutions which involve seriously reducing the amount of debt you owe.

The alternatives to bankruptcy will partly depend on what country you live in. For US residents, the main alternative to bankruptcy is called debt settlement, or sometimes debt negotiation. This involves using a specialist negotiator to work out new settlement terms with all your creditors, which normally means agreeing to significantly reduce the amount owed in return for an up front payment. You do not have to have money available for the up front payment, you just keep paying an affordable amount each month into a separate account. This money gradually builds up and is used towards the settlement payments as each agreement is reached.

If you are a UK resident, there is an equivalent to debt settlement, which is even better is some respects. The government introduced something called IVAs, or individual voluntary arrangements, and these are specifically designed to give you an alternative to the drastic step of declaring bankruptcy. They are formal agreements, which like debt settlement, involve negotiated agreements with your creditors, and usually involve a substantial part of your debts being written off. Because they are legally binding agreements, one advantage of them is that if you can get 75% of your creditors to agree, then the rest are legally bound by the arrangement too.

If you are considering bankruptcy and have not already discussed alternatives with a debt settlement or IVA company, then you should certainly do so. Do ensure that you only deal with reputable companies though, otherwise your situation could be made worse if you are given poor advice. Always look for well established companies who already have a reputation for delivering responsible debt solutions successfully. You should also consult more than one company, as offers and proposals will vary.

About the author:
Read reviews and recommendations for reputable online debt settlement companies and UK IVA providers. K D Garrow has worked as a senior manager with significant financial responsibility for the last twenty years. His website offers free, unbiased advice on a range of debt related issues, including recommendations for the best debt management companies in the UK and US.

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