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[C406]Chapter 7 Bankruptcy Exemptions

by Joseph Johnny, Jos

Though the Federal Law has the highest authority and power for passing laws related to bankruptcy, it also gives each state the independent authority for deciding the type of properties a debtor can keep at the time of filing for bankruptcy. Such laws that give such type of protection to the debtors are called exemptions. Those properties that are owned by the debtors at these times are called bankruptcy estate. Yes! The properties that seems included in the bankruptcy estate can be taken back to be sold so that the money can be paid to creditors.

Nowadays few states have also introduced their own exemptions eliminating the necessity to involve the federal laws here. Since residents of the state have the choice to choose between the either state exemptions or federal exemptions. One should remember that the federal exemptions are different from the state exemptions and the state exemptions differ from jurisdiction to jurisdiction, For example if the exemption for a car in Texas is $30000 then it may be $1000 for a place like Florida. So, depending on the location where one stays, the amount of bankruptcy that has to be files is known.

We have heard of the term wild cards mostly in Games, but did you know that we have wild card concept in Exemptions too. By Using a Wild card that may be introduced in certain states, one can get exemption that can be applied to any property, Here also the value of the wild cards will differ from place to place.

On the other hand, apart from these state and federal laws one need to give attention on the residency requirements too. To be eligible for the state exemptions, one should be a resident of that state for at least two years. In case you have not been in one place for more than two years then it requires trying for federal exemptions. Any exemption will work best depending on the property that is being protected either its home or vehicle.

The Exemptions for any automobile is $3225 whereas the exemptions for the household goods are $10775 and for furnishings it is $525. The Retirement funds like stock bonus plans, annuities, pension plans also come under exemption.

What are bankruptcy exemptions, and how are they determined? First off, these are only for individuals filing for bankruptcy and not businesses, and they are something that allows you to keep up your standard of living by protecting some of your personal possessions from being taken by the court to pay off your debt.

As I'm sure you are aware, in bankruptcy what often happens is that the court will take away your possessions to liquidate them and pay off your debts. Knowing what the court can take away and what they can't is very important to determining whether or not you should file for bankruptcy.

If they can take away basically everything you own, then obviously filing is a bad decision. However, if a lot of your things fall under bankruptcy exemptions, then it might be a smart thing to file, and get rid of your debts so that you can start over.

The way it works is, you can sometimes choose between the state and national bankruptcy exemptions, in the case of states who allow national exemptions. Each have their own rules on what can be considered an exemption and what cannot be.

However, often times, you must go with the state exemptions, as certain states (the majority, actually) don't allow national exemptions to apply to them.

It's a long story, but for now that's the way it is, and I will leave it at that. If you live in a state that allows national bankruptcy exemptions, you have to decide on which rules you want to go with, and can't just take portions of each that apply to you. You have to choose one or the other.

This is basically how it works. First, when you claim something as a bankruptcy exemption, you have to show the value of it right now, and not when you first obtained it, since this is obviously the amount the court will get for it by selling it.

There are only certain things that can be claimed, of course, otherwise why not just keep everything? Since each state is different, for the purpose of this article I will cover the more prominent of the federal exemptions.

First, the equity of the main residence you live in is exempt for up to $17,400, and you can use this money to live somewhere else once you lose your current place. Pension and retirement plans can also be claimed should you claim them, life insurance that is at least $9300, and also unemployment benefits can't be taken as well if you claim them.

There are quite a few other smaller things, and of course, your lawyer will be able to give you an extensive list, so that you can determine what you will have to lose and what you can keep. Remember, this only applies to chapter 7 bankruptcy, as with chapter 13, the individual follow a court ordered payment plan, and you aren't discharged of your obligations, as you are with chapter seven.

Your lawyer will be able to help you with bankruptcy exemptions, so while this is an introduction to the topic, it is no substitute for a competent attorney who can explain to you the ins and outs of this somewhat complicated topic.

Article Source : Bankruptcy Chapter 7 Law

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Both Joseph Johnny & William Perry are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

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