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Too Much Cash for Bankruptcy? Think Again.

Is Your Cash In Danger If You File for Bankruptcy?

Do you think you have too much cash on hand or in your checking/savings account to file for bankruptcy? Most people have no idea that there are many types of exemptions in bankruptcy. Exemptions are allowances for you to keep assets out of the bankruptcy. The bankruptcy court cannot try to utilize any assets that are exempted out of the bankruptcy. There are exemptions for cash, personal possessions, automobiles, home equity, retirement funds, and many other assets you may be looking to protect. The cash exemption is one that allows you to keep a certain amount of cash so that your cash will not be distributed to your creditors. Filing for bankruptcy will allow you to hold on to your cash and will protect your cash from any collections.

The cash exemption limit in bankruptcy is currently set at $26,925. What does this mean for you? It means that you can still file for bankruptcy and get your debts discharged even if you have up to $26,925 in cash assets sitting in a checking or savings account or any other form of money including cash in hand. We can take a closer look at this by an example. Let’s say you took out a $5000 pay day loan from a loan store. You now have $20,000 of cash total in your bank account. A bankruptcy can protect ALL $20,000 of your cash and still allow you to file for bankruptcy to get your $5000 pay day loan discharged. The end result is this: You keep your $20,000 in your bank account and your $5000 pay day loan gets discharged in bankruptcy. Discharge means you will not have to pay it back and they cannot collect on it in the future.

Why is this allowed? Some might see this type of solution as unfair to the lender or creditor that provides the payday loan, but let’s try and look at this in another perspective. If the person filing for bankruptcy has no income and cannot afford to pay their bills, but has $20,000 in their bank account, this $20,000 is the last of their resources. Although $5000 was borrowed from a payday loan while there was some income from employment, a lack of income was not expected to happen. It was the payday loan shop’s decision to lend the money (a payday loan or cash advance loan is a loan made to the borrower based on a history of income) and the borrower did not expect to lose his/her job. The bankruptcy is protecting the borrower’s last remaining assets because this person may not be receiving income for a while until new employment is secured. The government allows the right to file for bankruptcy so that the borrower can use the last $20,000 to try to survive without losing their money to creditors. The bankruptcy is a chance to eliminate debt and change a person’s financial situation into a manageable situation that can turn the situation around into a productive member of society instead of someone that needs to be helped by the government in the future.


Bankruptcy Law Professionals is a Bankruptcy Law Firm located in Southern California with offices in Riverside and Orange County.  We offer free consultations for all of our clients with our attorney and no commitment.  Contact us at 855 257-7671 to schedule an appointment.

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