Chapter 7 Bankruptcy Exemptions
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Filing a ch 7 bankruptcy doesn’t mean you lose all of your belongings and will be left on the streets. While a chapter 7 bankruptcy does liquidate your assets in order to pay your creditors, the Federal government and states have set up exemptions that allow you to keep a certain portion of your assets so you can continue to live a productive life.
Bankruptcy exemptions are basically laws that say you can keep assets that are worth a set amount of money. Any property that is worth more than the exemption amount can be sold by the bankruptcy trustee in order to pay your creditors. There are Federal bankruptcy exemptions and then there are also state exemptions. Each state can determine if you are allowed to use the Federal exemptions, or if you can only use the exemptions set by the state. Whether you can choose Federal or state, they each provide protection for the same types of property, just in different amounts. It’s important to learn what property is exempt when filing for chapter 7 bankruptcy protection so you can determine what property you will be able to keep.
Homestead Exemption – The homestead exemption is set aside for your home or mobile home. The exemption is used to cover the equity you have in your home if you intend to keep it when filing bankruptcy.
Personal Property Exemption – These bankruptcy exemptions cover things like clothing, furniture, burial plots, vehicles, deposits for rent or utilities, pictures, books, etc. Basically any property you own that is not attached to the Earth.
Wages Exemptions – A portion of any wages that you have earned but haven’t been paid yet can be exempt from bankruptcy proceedings.
Pensions Exemptions – Filing bankruptcy doesn’t mean you will lose all of the savings you have set aside for retirement. Federal and state bankruptcy exemptions are available for retirement accounts including traditional and Roth IRA’s, 401k’s, and pensions.
Public Benefits Exemptions – Exemptions are also available for compensation you are entitled to from crime victim’s funds, unemployment, workers comp, POW benefits and disability payments.
Tools of the Trade Exemptions – Tools, equipment and uniforms you own in order to do your job are exempt from bankruptcy proceedings up to a certain amount.
Insurance Exemptions – Exemptions for life insurance, annuities, disability proceeds and other insurance policies are available.
Alimony and Child Support Exemptions – Any alimony and child support whether already paid or still owed to you is eligible for a bankruptcy exemption.
Misc Exemptions – Some states also provide an exemption amount that is available to cover any property that isn’t covered under another exemption, or that is worth more than other exemptions cover.
Knowing the exemptions available to you is important when considering filing ch 7 bankruptcy in order to wipe out your debt. You should get a free bankruptcy review or speak to a bankruptcy attorney to make sure you won’t lose any important property by filing bankruptcy. Your bankruptcy exemptions are listed on Schedule C of the bankruptcy forms and can seriously impact your life, so educate yourself.
