If you have filed for bankruptcy for the first time you most likely have a lot of questions. One common question is, “How much can you keep in your checking and savings accounts before the bankruptcy court will ask you for the funds?”
The answer to this question will vary from state to state, and it will also depend on the type of bankruptcy you file.
There are basically two types of bankruptcies most individuals can file: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. Chapter 13 Bankruptcy, commonly called a wage earner’s plan, enables individuals with regular income to develop a plan to repay all or part of their debts over three or five years.
In Chapter 7 Bankruptcy, you will be asked to make a list of your debts and assets. From that list of assets, the bankruptcy court trustee will collect the non-exempt assets and liquidate them to pay the creditor claims on the unsecured debts you listed.
Exempt assets are either state or federal exemptions that include assets exempt from liquidation or sale of the asset. Secured assets are automatically exempt because they have a lien associated with the debt. Liens are normally not discharged in bankruptcies.
State bankruptcy laws mandate which exemptions you can use in a bankruptcy case- federal or state. Some states allow you to choose, others make it mandatory to use one or the other.
Checking and savings accounts fall under exemption status for any bankruptcy filed. Federal exemptions are found under the federal statutes, Title 11, sub-chapter 522. Under this code, you can have an exemption of $1,150 of any property, and you can add $10,825 more for any unused portion of the homestead exemption.
State exemptions can vary. In either case, it may be important in your checking and savings account where the monies originated. A bankruptcy lawyer can help you determine what is and what is not exempt.
In Chapter 13 Bankruptcy, exemptions may determine how creditors are going to be paid under the bankruptcy plan. The plan is based on your disposable monthly income and your ability to pay back a portion or all of the debts owed to your creditors. A bankruptcy court trustee will distribute the money to the creditors as determined by your plan.
Funds which are not part of the Chapter 13 plan can be used to run your household and pay for your living expenses. Money you can keep includes checking and savings account funds you may have remaining in those accounts. All assets and income must be accounted for during the plan, and you are responsible for meeting your payment responsibilities to the trustee.
Like Chapter 7 Bankruptcy, Chapter 13 Bankruptcy payment plans may adversely affect your checking and savings accounts. Where monies originate from in a checking or savings account may determine how a plan is administered or whether those funds can be used in the plan.
Therefore, how much you can keep before the bankruptcy court asks you for the funds will depend on which state you live, which exemption list you are allowed to use, and what type of bankruptcy you file. Contact a bankruptcy lawyer for more information.
If you need relief from the stress of debt and you live in or around the metropolitan areas of Seattle, Bellevue, or Everett, Washington, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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