Deconstructing the Myth of Bankruptcy Exemptions
Contrary to popular belief, filing for bankruptcy does not mean that you give up everything that you own. There are bankruptcy exemptions that protect your property even after your filing. Bankruptcy exemptions are the laws that stipulate that your creditors or the court trustee cannot touch specific property.
The bankruptcy code is a federal law applying to cases filed throughout the country. There are federal exemptions you can claim, or instead take your state's exemptions if they are more favorable. You cannot, however, pick and choose, you must take one or the other.
The Definition of Exempt Assets
All property that is personal, real, and covered by the available bankruptcy exemption is considered an exempt asset. These assets cannot be accessed by the unsecured creditors or the bankruptcy trustee.
Claiming Exemptions Is Easier Than You Thought
If you are a debtor trying to get bankruptcy exemptions, you have to submit the document Schedule C, to the court. This form applies to the state law or the bankruptcy code provision. Every property that is owned by the debtor is compared with the document to determine if it can be claimed as exempt property.
Property That Is Protected By Bankruptcy Exemptions
The value of exemptions varies from one state to another. Some examples of property that are typically exempt, within dollar limits, under state and federal banking exemptions are:
- Personal Property
- Motor Vehicles
- Real property that is used as a home by the Debtor
- Life Insurance
- Public Benefits: Social Security, Food stamps, Worker's
- Compensations, Veteran Benefits, etc
- Education Savings Accounts
- Alimony and Child Support payments
- Retirement accounts and pensions
- Personal Injury recovery settlement
- Other wildcard exemptions vary for each state; you can use this specified amount to claim any property within the dollar value limits that may not be covered by the standard deductions.
If you would like to keep all of your assets, filing Chapter 13 may be a good option for you. You will make a court-approved repayment plan over the next three to five years and at the end of that time, if you made all of your payments, any remaining qualifying debt will be eliminated.
If you are considering filing bankruptcy and would like more information on what you will be allowed to keep during a Chapter 7 bankruptcy, contact a Sacramento bankruptcy attorney.