What Property is Exempt in Bankruptcy
Posted By Price Law Group
With the Bankruptcy Code, state laws on exemptions are more uniform than ever before. That means we can go over the basics on exempt and nonexempt property after filing bankruptcy.
What is exempt property?
Exempt property is assets you can keep. Nonexempt property you can’t keep. That means if you own a home and it’s considered exempt, you can keep it. If you have a property valued too high, and you’re filing Chapter 7 bankruptcy, that may be considered nonexempt and you cannot keep it.
What forms of bankruptcy use exemptions?
Chapter 7 bankruptcy, the most common for many years but somewhat less common currently, is where exempt and nonexempt assets are considered. Why? Chapter 7 is a liquidation–a trustee will sell your nonexempt assets in order to pay debtors. Chapter 13 bankruptcy is different.
If major property is considered nonexempt, what next?
If you have a home and it’s considered to be worth too much, and if you have a stable income coming in, you may consider filing under Chapter 13 bankruptcy. Chapter 13 is not a liquidation–it’s a repayment plan spread over 3-5 years. You are to pay bills on time, but you have extended periods to pay them back. In the case of having an expensive home or car you fear losing because of nonexemption, Chapter 13 is a good option. You pay back all debts, but you potentially can keep all your assets.
What property is exempt?
The Bankruptcy Code changes how states consider exemptions. Some states are still, however, very different than others. It depends on if the laws were accepted or not, as some states opted to follow Bankruptcy Code on exemptions and some have not. If you’re home is valued too much, you may lose it in Chapter 7 bankruptcy. In some cases, you might be able to keep it while still discharging debts. In this case, you should hire an experienced lawyer.
What you need to know for your home and car is what equity is left.
Questions for Your Bankruptcy Lawyer
What assets can you keep? That’s the big question. Clearly if you invested a lot of money into a home, if you have a valuable car, and have other valuable assets you fear losing, a good option is to hire an experienced bankruptcy lawyer. He/she can explain your options, how state laws work, and what form of personal bankruptcy you might file. Be thorough with your questions about what property is exempt and nonexempt. There are no bad questions when it comes to bankruptcy law.
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