What Property Can I Keep After a Chapter 7 Bankruptcy?
The Bankruptcy Code (11 U.S.C. § 522(b)) allows an individual debtor to protect some personal property from the claims of creditors because it is exempt under federal bankruptcy law, or under the laws of the debtor's home state.
Many states have taken advantage of the provision in the Bankruptcy Code that permits each state to adopt its own exemption law in place of the federal exemptions, and in these states, the treatment of exemptions looks much like it did before the Bankruptcy Code was enacted in 2005.
In sixteen states and the District of Columbia, you can chose the exemptions that work the best for you - either the federal exemptions or your home state's exemption statute. It is always best to check with an attorney in your state to see what exemptions apply to your individual case.
Some of the primary exemptions that may be available to an individual filing bankruptcy under federal law are as follows:
Exempt Property:
- Homestead (equity in your primary residence)- up to $20,200
- Automobile (equity held in one vehicle) - up to $3,225. The equity in your car is based on the car's market value, less any loans against it.
- Household Items (appliances, furniture clothes) - up to $10,775, $525 maximum per item.
- Jewelry and heirlooms: up to $1225 in value.
- Tools of the trade - up to $1850 in value.
- Life insurance - includes disability benefits and unmatured life insurance policies.
- Alimony and child support - amount reasonably necessary for support of debtor and dependents
- Public benefits such as unemployment, workers compensation, public assistance, Social Security or Veteran's benefits.
- Retirement funds are exempt under § 522(d)(12) of the Bankruptcy Code. The exemption applies to pension, profit sharing and stock bonus plans, employee annuities, Individual Retirement Accounts (IRAs), deferred compensation plans such as your 401(k) account, and certain trusts. The 2005 amendments to the Bankruptcy Code expanded the protection allowed to certain tax-exempt retirement plans that weren't always protected under former law.
Non-exempt Property
- expensive musical instruments (unless you're a professional musician)
- stamp, coin and other collections
- cash, bank accounts, stocks, bonds and other investments
- second car or truck, and
- second or vacation home.
The following states allow a debtor to choose either federal or state created exemptions (but not both): Arkansas, Connecticut, The District of Columbia, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington, and Wisconsin.
All remaining states have opted not to allow its residents to utilize the federal exemptions, so each state has its own statutes which define and list the exemptions. Talk to a bankruptcy lawyer in your area to determine which set of exemptions is best for you.
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