Definition of Bankruptcy Exemption
Bankruptcy exemption is where assets you own receive immunity from the bankruptcy process through state or federal law. In any type of bankruptcy filed, an asset exemption can influence the outcome in how creditors are dealt with during the bankruptcy legal proceedings. Any exemption, determined by state or federal law, protects the assets society says is fair for the bankruptcy filer to keep in order to make a fresh financial start.
Relationship of Types of Bankruptcy to Exemption
In a Chapter 7 bankruptcy, an individual type bankruptcy often called liquidation, an exemption protects an asset held by the filer that may be liquidated in order to satisfy unsecured debts held by creditors.
In a Chapter 13, an individual type bankruptcy called a wage earner’s plan, an exemption is used to determine whether or not the plan follows requirements a Chapter 13 plan must provide creditors, equivalent to what creditors would have gotten if the filer had filed a Chapter 7.
In either regards, an exemption can be productively listed in the application schedule provided by the bankruptcy court.
Being Productive with Your Exemption
State and federal exemption laws specifically spell out categories in which assets may be listed for exemption of the bankruptcy process.
Here are some productive thoughts in ways you might list assets in order to maximize your full exemption right when filing:
Depending on state law, you often have the choice to choose either state or federal law when determining which exemption list you will use. Being productive on choosing here may save you a lot of money in the long run. Know bankruptcy law, what assets owned you want to keep, and whether state or federal law will help you the most when it comes to an exemption.
Tools of your trade is an exemption category you can be the most productive in building your exemption list. Here is an inconclusive list of assets that may be considered tools of the trade: office supplies; computers; printers; scanners; cameras; carpenter tools; mechanic tools; work shop machinery; musician instruments; office furniture; and a car, truck, or van used for more than just commuting to work.
The wild card exemption is a place you can be imaginative in listing what asset you want to protect in filing bankruptcy. The federal law for exemptions in this area currently include $1,150 for any property, and you can use any unused portion of homestead up to $10,825.
Here, you can maximize your protection efforts by having a good grasp on the assets you will need going into the future after bankruptcy.
Personal property is another listing category you should familiarize yourself before filing bankruptcy. Your personal vehicle, household goods, clothing, books, and a large variety of other assets are usually included in this category. Federal law for an exemption currently allows $550 per personal item up to $1125. You might maximize you productivity by carefully listing what is personal, tool of your trade, or a wild card entry.
A homestead exemption is another category under both state and federal law, and is any real property, including mobile homes, co-ops, and burial plots up to $21,625 as listed under the federal exemption laws. Many filers productively choose to use the federal homestead exemption because of the liberal unused portion of the law. Up to $10,825 may be used for other property.
- Bankruptcy Spectrum and Protecting Individual’s Assets (betterbankruptcy.com)
- Can You Keep Your Own Tools for Your Job After Filing Bankruptcy? (betterbankruptcy.com)
- Eleven Common Bankruptcy Definitions You May Want to Know (betterbankruptcy.com)
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