Bankruptcy Exemptions
About Bankruptcy Exemptions
When you file your bankruptcy, you will be required to fill out a large amount of paperwork, and you will have to list the list the property you are claiming exempt. Exempt property is that which you are permitted to keep.
Federal and state laws separately provide a list of exemptions for certain types of property. This property varies from state to state. If federal exemptions are higher than exemptions provided for in your state, you would likely choose to file using federal exemptions. If your state exemptions are more forgiving, than you file using state exemptions.
On the other hand, there are lawyers that favor one over the other. For instance, I consulted with one attorney who advised me not to file using state exemptions and would only file using federal, as he felt the process was smoother, and there were fewer potential problems with the process. Also, there are some states that do not permit using federal exemptions, so you will be forced to go with state exemptions if you are a resident of one of those states. You will need the expertise of a good bankruptcy lawyer to best advise you.
If you do not file bankruptcy using federal exemptions, whether because your state does not permit it, or you choose not to, you can use the federal non-bankruptcy exemption list.
If you file using federal exemptions, and you are filing with a spouse, you may double the exemptions.
What property is exempt under state laws?
Most states allow you to keep much of your personal property that has little or no value. You can even keep collateralized property in some circumstances, but you will have to reaffirm the debt, and you must do this before discharge.
Personal property includes tools that you use to earn a living within limits, your clothing, and household goods. Usually wages, 100% of unemployment and welfare benefits, worker’s compensation, pensions, and insurance benefits are exempt. Not all states permit you to double exemptions if you file with a spouse using state exemptions, so you’ll need to assess that before making a decision.
You need to make sure that you have planned for your bankruptcy and that your assets are protected. Make sure you hire the correct attorney for the job!