Many folks in Carmichael and Citrus Heights, CA are scared of bankruptcy because they think that the court is going to take away all of their property and they’re going to end up on the street. Fortunately, the bankruptcy laws aren’t that primitive. The bankruptcy laws recognize the fact that when a person is in debt, they shouldn’t be penalized by having all of their belongings taken away. The laws also recognize that, if people were forced to give up all of their property, then they might end up needing governments assistance in the form of housing, clothing, and public assistance benefits, which puts a much greater burden on the American economy. Everyone who filed bankruptcy gets to claim a certain amount of property as “exempt.” This means that the court-appointed trustee won’t be able to take it away and give the proceeds to the creditors.

Because it involves the debtor’s property, it is extremely important that the appropriate exemption laws are applied to a particular case. The Bankruptcy Code sets forth how to determine which exemption laws apply to a case. If the debtor was “domiciled,” or living in the state as their home state, for the past 2 years prior to filing, then the debtor can use the laws of the filing state or federal law if the filing state allows the use of federal exemptions. Some states allow that, others do not. Filing bankruptcy in California tends to allow the most exempt property compared to other states.

If the debtor was not living in the state in which she filed during those preceding two years, then there are a few more considerations to determine which exemption laws apply. In these situations, it is most certainly a good idea to find an experienced bankruptcy attorney that knows the bankruptcy laws and rules.

Most bankruptcy exemptions are based on local state laws. Some give the option to use federal exemptions. Here in California, debtors must use the various California state exemptions provided in the Code of Civil Procedure.

Once the debtor has disclosed all of her assets to her bankruptcy attorney and they sit down and look at what assets will be protected by exemption, it is often a good time to decide whether Chapter 13 or Chapter 7 bankruptcy is the right choice. If there are assets that are not protected by the exemptions, then it could very well behoove the debtor to file Chapter 13 to protect it. As with many things in life, there is a trade off. A Chapter 13 takes longer and will cost more. But if that non-exempt asset is of great value to the debtor, it is usually worth the time and expense.

The laws of each state can affect the outcome of a bankruptcy to a great extent. There may also be considerations for property located in different states. This analysis applies to all bankruptcy cases, even those that may seem simple at first. If the correct exemptions are not applied, it could allow the trustee to take the property and sell it to pay creditors. An experienced bankruptcy attorney will know how to determine which exemptions apply. Before you file bankruptcy, make sure your property is protected by the right exemptions!