You’ve been considering filing for Chapter 7 bankruptcy. This would mean that you have to liquidate your non-exempt assets. The money that you make during this liquidation process can then be used to pay off a portion of your debt. Creditors will get something back, but the remaining debt will be forgiven during the bankruptcy case.
However, your concern is that liquidating your assets would leave you with nothing. This could make it impossible for you to earn money in the future.
For instance, perhaps you’ve been working as a carpenter or a handyman, so you have power tools and hand tools that are necessary for your profession. Or perhaps you work as a writer, so you need to have your computer, internet equipment and other things of this nature. If you file for bankruptcy, are you going to be forced to sell all of the very items that would make it possible for you to earn a living moving forward?
The tools of the trade exemption
Fortunately, one of the common exemptions to bankruptcy is for the tools of the trade. If you own items that are necessary for your profession, you can likely exempt a certain percentage of them from the bankruptcy process. You may be able to protect everything you need so that you can continue earning after you file for bankruptcy.
Remember, the goal of Chapter 7 bankruptcy is to give you a fresh start financially. The goal is not to make it so you can never earn a living again, which would be contrary to creating a positive financial future. This is why it’s so important to understand what exemptions exist and the legal steps to take to use them during bankruptcy.