I Don't Surrender: Bankruptcy Exemptions And What You Can Keep
Many filers get hung up on the big bankruptcy decision, and it's easy to understand why. Not only is filing an admission of financial failure, but the consequences of the bankruptcy could mean that you suffer for years to come. You can build your credit back up, but the federal filing leaves a black mark on your credit report for many years. Those concerns, however, sometimes pale in comparison to losing your property. A chapter 7 bankruptcy is also known as a liquidation filing, for good reason. Read on to learn more about the saving grace of a chapter 7 bankruptcy filing, the exemption.
Will you lose your home?
This thought strikes fear in the hearts of all. Homes are not just brick and mortar; they stand for family and security. The mere possibility that you might end up having to surrender your home makes many bankruptcy filers put the decision off indefinitely. You should know that a bankruptcy filing may not automatically mean that you have to give up your home. It just means that you need to understand several key facts and how they work together to determine your exception. Each state allows you a homestead exemption, and the amount of the exemption can be deducted from the equity in your home. The equity is the value of your home minus how much you still owe on your mortgage. If you are filing jointly, you may get a double exemption in some states.
Take the following scenario: Your home is valued at $250,000 and you still owe $210,000 on your mortgage. If your state allows you an exemption of at least $41,000, you will get to keep your home. The key fact to understand is that the bankruptcy courts would need to pay off your mortgage and then sell the home. Another consideration is the amount of your bankruptcy. If your debts are less than the value of the home, the bankruptcy trustee won't bother with it.
Will you lose your car?
Just as the mortgage example above, you are likely much better off if you still owe quite a bit of money on your vehicle. In most states, your vehicles don't get a separate exemption and it is instead lumped together with other personal property exemptions. Keep in mind that you also may have the option to reaffirm your debt and keep your car by purposely leaving that debt off the bankruptcy petition. Speak to your bankruptcy attorney if you wish to continue paying your car loan so that you can avoid surrendering it.
Other miscellaneous property.
Unless you have an extraordinary collection of fine art, furs, and jewelry, the bankruptcy trustee will take very little interest in your personal property. The goods would need to be sold, and used goods don't normally hold a lot of value.
To get more specific information about how exemptions work in your state, speak to a bankruptcy attorney from a firm such as Geranios Law PLLC.