Don’t Do That! (Part 1) Panic is a normal reaction when a creditor threatens legal action to collect a debt. If your house or car is paid off, or you have a large amount of cash in your bank account, those assets could be especially vulnerable to creditor collection activity. The Bankruptcy Code, and every U.S. state, has a series of “exemptions,” a dollar-amount limit on the value of assets that will be protected from creditors. If the value of your assets exceed the amount of those exemptions, they might be at risk. (Here’s a quick example: Assume you own a home valued at $150,000, with no mortgage. Your state allows a $43,000 “exemption” in your homestead. A creditor or bankruptcy trustee could force the sale of your home, pay you the first $43,000 in proceeds, and use the rest to pay your creditors!) Bankruptcy can often protect assets when their value exceeds the exemption limit, but that usually requires the ability to use future income to pay the value