Sometimes in a Bankruptcy case, timing is everything There are lots of numbers in the Bankruptcy Code: numbers that limit filing under Chapter 13 consumer reorganizations based on the amount of debt that you owe; numbers that determine the amount of your exemptions; and numbers that determine your eligibility for a Chapter 7 filing based [...]
One of the big concerns of consumers who are considering bankruptcy is that they will lose all of their property. In fact, the “I can't file for bankruptcy because I will lose everything I own" myth is one of the biggest misconceptions out there about the bankruptcy process. Rather than automatically losing all of your property, the bankruptcy court compares your assets against the applicable exemptions for your state to determine whether there is anything to distribute to creditors. The majority of people who file for personal bankruptcy are able to utilize exemption laws to retain all of their property through the process. Each state, as well as the federal system, have bankruptcy exemption laws which are designed to protect property. Some states, such as New York, only allow debtors to use their state exemption laws. Others, such as New Jersey, allow debtors to choose between either state or federal exemptions. Certain types of assets, such as IRAs and 401(k) accounts, are protected by federal law regardless of which exemption regime applies. Exemptions are rooted in public policy, with the idea being that it is unfair to allow consumers to shed unmanageable debt and be left with no property with which to start over. As a result, exemption laws designate certain types of property, up to specified dollar amounts, as exempt from the claims of creditors and the trustee. For example, Florida has an unlimited homestead exemption for long-term residents. This means that, in the event a Florida resident were to file for bankruptcy, their home would be exempt. They would not lose their primary residence regardless of its value. Similarly, the state of Illinois allows debtors to protect up to $2400 of equity in a car. This means that if you own a car worth $10,000 that has a loan of $8,000, you can file for bankruptcy in Illinois and keep your car. In this example, your $2000 of equity is under the maximum of $2400 allowed under the exemption statute. Even if the hypothetical changed so that there was $3,000 of equity in your automobile, you still would have the option to retain your car. Although bankruptcy trustees can liquidate property to access its nonexempt value, doing so requires a great deal of time and effort. In many cases, trustees are willing to enter into Cash Settlements with Debtors Rather Than Taking the Time To Sell Their Property. Exemption laws vary greatly by state, it is usually a good idea to meet with a local bankruptcy attorney to discuss how your property will be affected. Below, we organized a library of articles that touch on the subject of bankruptcy exemptions, if you don't see what you're looking for, we invite you to visit our QA forum. Thank you for visiting the National Bankruptcy Forum.
Bankruptcy Vehicle Exemption in California California bankruptcy filers must choose the California exemptions, since California is among the states that have opted out of the Federal exemption. California has two sets of exemptions: the California exemptions and California’s Federal-like exemptions, which for the most part are the same as the Federal exemptions. Each set of [...]
Exemption laws protect your property from creditors Inside of bankruptcy, exemption laws shield certain items of property from the bankruptcy trustee. Outside of bankruptcy, exemption laws protect your property from judgment creditors. The first rule to remember is that not all of your stuff is exempt. Each state and even the federal government have laws [...]
A judgment is a legal determination that you owe a debt A judgment is really just a piece of paper signed by a judge that says you owe a debt. For example, in the event you can’t pay a credit card on time, the bank has no immediate recourse. They can call and write, but [...]
A person is judgment proof when under the laws of their state, a judgment creditor (lawsuit plaintiff) has no practical ability to force payment of the judgment. In North Carolina, which does not have generally available wage garnishment statutes, a judgment debtor is effectively judgment proof if all of his or her property can be [...]
‘Tis the season when bankruptcy trustees are taking tax refunds. Potential tax refunds MUST be disclosed on your petition just like your couch and car. Not disclosing your State and Federal tax refund is often a sure way to forfeit your tax refund. The problem with tax refunds is usually there is no specific exemption [...]