Bankruptcy conjures up the images of a person left standing alone on a street; perhaps holding a suitcase or maybe not even that. In truth there are many things that you can keep when you go through bankruptcy. But what exactly is protected, if anything? Is your super cool large-screen iMac safe? What about your house? Your summer cottage? Let’s have a look at the basic exemptions under Chapter 7 of the bankruptcy code in the United States.
The homestead exemption
If you own a home, you will not be left standing out on the dismally gray street with only a suitcase. Your residence is usually exempt from the Chapter 7 proceedings. You need to know that there are some rules and laws attached to this homestead exemption that varies between states. It is possible, for example, that you may not be able to hang on to an home with a value that is far above average. Also, if your spouse owns the property with you, some special rules may apply. There are instances where a condition may be included in a Chapter 7 ruling that pertaining to your home ownership may require you to continue to make mortgage payments. A lawyer familiar with the homestead exemption in your particular state can provide you with the information you will need to ensure that you are in your home when the Chapter 7 proceedings are complete.
Vehicle exemption
And not only will you not be put out of your home on a gray, bleak morning but you will have the option of sitting in your car. People who file for Chapter 7 usually get to keep their vehicle, though there are relevant state exemption requirements. Basically, your car needs to be worth less than the prescribed limit in your state of residence. Most estimates put the average value of a state’s limit regarding cars and Chapter 7 at 3,000 USD. And, fear not, if your car is worth more than this, you may be able to pay the difference so that you can keep it.
There are a variety of other attached exemptions. Our imagined bankrupt fellow from the first paragraph owns more than the suit on his back. Clothes, appliances like refrigerators and stoves, alimony payments, child support payments, retirement accounts and life insurance policies are all usually exempt during a Chapter 7 bankruptcy.
A citizen facing Chapter 7 bankruptcy should absolutely know that he/ she won’t be rendered homeless, clothes-less, car-less, sofa-less or computer-less. A bankruptcy lawyer might seem like an unnecessary expense if you can’t pay your bills. The thing you need to understand is that a licensed bankruptcy attorney can provide you with the information necessary to come out of your Chapter 7 filing, ready to put one financial foot in front of the other, and start over.
