If you pass the means test and qualify for Chapter 7 bankruptcy, deciding to file will not be the last major choice in the process. You will also have to make an important decision about what bankruptcy exemptions you will use. The proper use of bankruptcy exemptions will set you up for financial success after your discharge.
In a Chapter 7 filing, there is usually an expectation that you will liquidate any property you own in excess of an established exemption threshold. You have to report your property and income to the courts and allow the sale of some of your belonging. After the trustee facilitates the sale of certain property, they will distribute the money among your unsecured creditors according to their priority.
You can only protect the property you can exempt, and you will need to choose between federal and state exemptions.
Your circumstances dictate the best choice
Some states do not allow those filing for bankruptcy to use federal exemptions. They can only apply state exemptions when they file. Thankfully, Alabama is a bit more generous. It has its own exemptions, and it also allows people to choose if they would prefer the federal exemptions.
The property you have to protect will influence which exemptions are better for you in your current circumstances. The federal exemptions allow you to protect more home equity, for example, while the Alabama state wild-card exemption is more generous than the federal one.
Creating an inventory of your assets may hope you choose between the federal and state exemptions. Learning more about Chapter 7 bankruptcy will allow you to maximize the benefits you derive from piling.