What Are Bankruptcy Exemptions?
If you are considering filing for bankruptcy, there’s a good chance that one of your biggest concerns revolves around which of your possessions you will be allowed to keep and which you will be required to sell to satisfy your debts. The answer relies on a number of different variables, including the state in which you live, the exemptions that you are entitled to, and whether you will be filing under Chapter 13 or Chapter 7. Let’s take a look at what exemptions are and how they will impact you.
If you file under Chapter 7, exemptions spell out exactly which of your assets you will be able to hold onto and which you will need to liquidate. What is exempt is what you can keep, and what is nonexempt is fair game for the trustee to sell. In Chapter 13 you are able to keep everything you own, which is in large part due to the fact that Chapter 13 is a repayment plan rather than a plan that discharges your debts. You will end up paying your creditors the value of what you owe that isn’t exempt or the value of your disposable income, whichever is greater. If your equity in your property is equal to or less than the exemption amount in your state, you can keep it under Chapter 7 and won’t need to pay additional monies to hold onto it under Chapter 13.
Beyond these basic rules, here is a quick rundown of what property is exempt in bankruptcy:
- Your ability to keep your home will depend upon your state’s homestead exemption.
- In most cases, you will be able to keep your car or other vehicles if you have equity in it.
- If you own property as an investment, you are likely to have to sell it in a Chapter 7 bankruptcy
- Retirement savings accounts such as 401(k) and other qualified retirement accounts are exempt, and so are at least some amount of most pension accounts.
- Social Security income is exempt.
- Most or all of your household goods and furniture are exempt.
Bankruptcy is a big step and it is important that if you choose to file, you do so with the guidance of an experienced and knowledgeable attorney. To set up a time to discuss your situation, contact us today.
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