The intent of a bankruptcy filing is to put someone in a better financial position, not to make things worse. Fortunately, the filing doesn’t mean a debtor has to surrender all of his or her possessions. The law allows filers to keep most assets needed for daily life, such as clothing, household items, and retirement accounts. In this guide, readers can find out how exemptions may allow them to hold onto some things after a bankruptcy.
How Property is Protected During Bankruptcy
Once a person files, everything they own is included in the bankruptcy estate. A court-appointed trustee is tasked with overseeing the estate and disbursing funds to creditors. State exemption laws determine which property a filer can keep, and some jurisdictions follow the federal exemption list. In some instances, Joseph I Wittman Attorney at Law may be able to help clients choose between state and federal exemptions.
Most people can keep a variety of personal property when they file for bankruptcy, such as:
Bedding, kitchenware, and furniture
Tools for work
A modestly priced vehicle
Some home equity
This list is not all-inclusive, and states often provide additional protections.
In bankruptcy, clients must typically surrender luxury items such as expensive and exotic cars, boats, RVs, airplanes, vacation homes, rental properties, valuable artwork, and investment accounts. In areas with wildcard exemptions that allow clients to keep the property up to a certain value, the exemptions can be used on anything worth that amount or less.
Exemptions in Chapters 7 and 13
The bankruptcy chapter a client chooses doesn’t affect the amount of personal property they can exempt. However, the non-exempt property is treated differently depending on the chapter filed. It’s important for clients to understand the differences because it can help them choose the right chapter for their situation.
Claiming Property Exemptions
Property exemptions are not automatic. If a client doesn’t take steps to claim exemptions, they can lose certain items. Joseph I Wittman Attorney at Law can help clients list exempt assets on Schedule C, and he can list the laws that allow for the exemption. Click here to learn more about bankruptcy exemptions or to schedule a free initial consultation.