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Exemptions make bankruptcy truly effective

Some people are surprised by the idea of bankruptcy exemptions. They assume that you'll have to sell or liquidate all of your assets in order to eliminate your debt. That, or they assume that the creditors will take everything that you own since you aren't going to pay them back the money that was promised.

While this misconception is understandable on some levels, the reality is that bankruptcy just wouldn't work without exemptions. It would be massively counterproductive and would lead to more debt, rather than eliminating debt and helping people get back on their feet when they're facing tough financial times.

To understand this, you have to really look at the big picture, not just the financial numbers. Imagine that you're facing debt that you'll never pay off, so you use bankruptcy to eliminate it. Without exemptions, you have to give up your home, your car, and anything you can use to earn money, such as business equipment.

Does that really help you? Do you really get a fresh start if you're now homeless, unable to work on your own without your equipment, and unable to get a different job without a car? No; you're clearly in a worse position than you were in to begin with, and you'd have to go back into debt to get the necessities of life back again. That's the opposite of what bankruptcy is trying to accomplish.

When you're filing for bankruptcy in Pennsylvania, keep the real end goal in mind. Remember what bankruptcy law is supposed to do and the tools it gives you to reach that end. Make sure you use them all to your benefit.

Source: FindLaw, "Exempt vs. Non-exempt Property Under Chapter 7," accessed Sep. 26, 2016

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