Bankruptcy exemptions are extremely important when filing for financial insolvency and you must understand what the term means. A very simple definition is that the, individual or business entities, may list certain assets (as determined by law) to be protected from seizure by the creditors. A more precise definition is provided below.
Legal Definition of the term bankruptcy:
The administration of an insolvent debtor's property by the court for the benefit of the debtor's creditors. Source: Merriam-Webster's Dictionary of Law,
Legal Definition of the term exemption/exemptions:
1 : the act of exempting or state of being exempt
2 : one that exempts or is exempted
Insolvency exception is extremely complex and usually involves a great many terms of 'legalize'. The 'legalize' makes it extremely difficult, for the lay person, to grasp precisely what is protected from seizer by the creditors. Thus it is imperative to consult qualified legal advise prior to making the decision to file for financial insolvency.
To further complicate the matter, when seeking relief from the creditors, all cases must be filed in the federal court system that is responsible for processing all insolvency cases. This is further complicated because even though filed in the federal courts, rules protecting certain assets from the creditors, are acquired from the individual states. Due to the variance of the individual state laws, it is inadvisable to generalize asset protection issues that reach across state borders.
It should be further noted that the retention of certain assets will vary, depending on which chapter of the financial insolvency code is chosen. Furthermore, individual and businesses assets exceptions will vary depending under which chapter the insolvency liquidation will take place in. Again, proper legal advise should be consulted prior to making the decision as to which filing would be appropriate. For convenience we have listed the codes directly below.
1. Chapter 7: Liquidation
2. Chapter 9: Reorganization for municipalities
3. Chapters 11 and 13: Reorganization
4. Chapter 12: Reorganization for Family farmers/fishers
The importance of asset protection by 'bankruptcy exemptions' may well be the 'oxygen line' that leads to survival for those seeking liquidation of debt.
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