Whether a borrower gets into financial hitches as a result of poor planning or circumstances beyond control, the bottom line is that some kind of action must be taken, and fast. After considering all available options, most people decide to declare bankruptcy. In a number of cases, the lawyer or financial advisor often brief the consumer on what property is protected during bankruptcy and which ones may be auctioned to pay off certain debts as some wait until a debtor stabilizes financially.
As much as debtors often breach contract previously signed between them and lenders when they are unable to repay the money borrowed, the law is fair to all parties and will usually allow a borrower to keep certain property that is deemed necessary. Before one makes the decision for bankruptcy declaration, it is important to know what property is protected during bankruptcy because whatever happens after debts have piled, life must still continue.
When an individual files for bankruptcy, the aim is to seek protection from creditors. Remember before the two parties enter into an agreement, paperwork is signed which obligates both parties to honor their part of the bargain. As it is however, borrowers often default, leaving creditors with no option but to seek some property to have part if not all of their credit repaid. Good news is; not all that one owns can be taken away. It pays to know what property is protected during bankruptcy to keep out worries and the stresses wrought about by debts.
Lenders are business people whose major source of income hails from interest gathered through the money borrowed by clients. While a good number of consumers pay back debts, there is the other quarter that cannot honor the contract due to a number of issues. As soon as a defaulter files for bankruptcy, lenders are keen not to touch bankruptcy protected assets and instead rush to obtain court orders to auction the non-exempt property. This means that the law is fair to both parties and no one is subject to exploitation.
Assets That are Protected Under Bankruptcy
Below are assets that are protected under bankruptcy;
- Cars whose value does not exceed a certain amount of money.
- A certain amount of earned wages.
- Household appliances.
- Jewelry that costs up to a certain amount of money.
- Tools of trade used by a debtor to get income.
- Necessary clothing.
- Finances obtained after getting injured at the workplace or elsewhere.
- Social security and compensation due to unemployment.
There is certain property that is not exempted from bankruptcy. These are;
- Musical instruments whose net worth is high. There are however exceptions if the debtor is a musician who depends on singing to make a living.
- A second truck or car, i.e., that the debtor does not depend on to make a living, or does not use regularly.
- Family ornaments that can fetch a good bargain.
- A second home that is normally used for vacations or for luxurious visits.
- Stocks, bonds, bank accounts, investments and cash if there is any.
- Valuable items like stamps collections, coins and the rest. See more at Debt Mediators
Borrowers struggle to repay loans and resort to bankruptcy when things get out of hand. In case one is unable to pay off debts and may lose some items, it is important to remember that bankruptcy protected property cannot be used by lenders to pay off those pending debts. For more details, just visit https://www.debtmediators.com.au/bankruptcy-solutions/bankruptcy-protected-property/.