Both Chapter 7 and Chapter 13 bankruptcy rely heavily on bankruptcy exemptions. In a Chapter 7 bankruptcy, you are permitted to keep a percentage of your property as an exemption.
Your Chapter 13 bankruptcy plan payments will be modest if you utilize exemptions. The bankruptcy laws are complicated. Seek counsel from a bankruptcy attorney in Charleston, WV to exercise your rights effectively.
In the following paragraphs, learn how bankruptcy exemptions work and how they affect your finances.
Bankruptcy Exemptions: What Are They?
When you declare bankruptcy, you can keep the specific amount of assets that you want. These can include a cheap car, professional tools, clothing, and a retirement account. You don’t have to worry that your exempt assets will be sold to creditors if a purchase is exempt.
Many exclusions cover specific property types up to a certain dollar amount, such as a car or furnishings. An exemption can sometimes safeguard the asset’s total worth. Some exemptions are “wildcard exemptions” that apply to any property you own.
The Exemption Process: How Does It Work?
The exemptions differ according to whether you file a Chapter 7 or a Chapter 13 bankruptcy.
Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, the appointed trustee sells your nonexempt assets to settle your debts. Exemptions protect your assets in Chapter 7 bankruptcy by preventing the trustee from selling exempt property. For instance, if your state offers a $5,000 motor vehicle exemption, you may keep your car even if it is worth only $4,000.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, you can keep all your assets and restructure your debts (so that some of your obligations may be reduced). Nonetheless, the amount of equity you can exclude still determines how much you owe certain creditors.
Unsecured creditors who aren’t first in line (such as credit card companies) must be paid an amount equal to your nonexempt assets. Exemptions decrease your Chapter 13 payments by lowering the amount you must pay creditors.
Federal and State Bankruptcy Exemptions
There are bankruptcy exemptions in each state. A series of exemptions is also provided by federal law. In some states, you may be forced to use the state’s exemptions while in others, you may be allowed to choose between the federal system and the state’s exemptions (you cannot combine the two).
Your eligibility to apply for state exemptions will be determined by where you lived in the previous two years” (called your “domicile requirements.”).