When considering bankruptcy, people want to know what are bankruptcy Chapter 7 exemptions?
First, a person needs to understand that Chapter 7 bankruptcy is known as the liquidation bankruptcy because a debtor’s property that is not exempt is sold and the net proceeds are distributed to the debtor’s creditors. The more property that is exempt, the more property that a debtor can keep after filing bankruptcy.
While bankruptcy is federal law and bankruptcy cases are filed in the federal district court for the area in which the debtor lives, state laws have a big effect on bankruptcy. As part of the federal law, states may determine what property is exempt from a Chapter 7 bankruptcy. Therefore, bankruptcy Chapter 7 exemptions vary state to state. That is the reason you may have heard that a lot of famous wealthy people move to Florida and then file bankruptcy. Apparently, Florida’s exemptions are more generous than other states.
Most states exempt at least a portion of the following:
– Household goods such as furniture, kitchen appliances and utensils, electronics, etc.
– Personal items and property such as clothing, jewelry, etc.
– Health aids.
– Tools of a person’s trade.
– Automobiles and vehicles.
– Homes used as the debtor’s primary residence.
Generally, the way that a portion of property is exempt is that dollar values are used. For example, a state law may say that $2,000 of a car’s value is exempt and that the exemption is applied to the equity that a person has in the property. If there is a loan on the car, the exempt amount is applied to the amount of equity that the debtor has in the car. In our example, if the car is worth $5,000 with a loan balance of $3,000, then there is $2,000 in equity. If the exemption is $2,000, then the car is exempt from the bankruptcy ($2,000 equity less $2,000 exemption) and the debtor may keep the car as long as the debtor pays off the car loan.
To determine exactly what property is exempt, you need to look at your state’s laws. Information that you find on the internet may or may not be accurate. The best way to learn what property is exempt is to contact a lawyer.
This is only general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.
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