Aug
Exempt vs non-exempt assets
One of the most common doubts for bankruptcy filers is in determining what assets are exempt when filing bankruptcy, this is not always clear especially if there are versified assets involved. As always it is best to consult a bankruptcy attorney to determine this with precision, but this post should give you an idea.
Exempt assets are those that can not be included in the bankruptcy estate, for example your retirement account. 401K, IRA accounts and other retirement accounts are in most states exempt from liquidation, however some states do consider these types of assets non-exempt so it’s important that you check with your attorney to make sure that yours will be safe.
Non-exempt assets are those that will be included in the bankruptcy estate and you must surrender in order to process your bankruptcy discharge. The bankruptcy trustee will use these assets to liquidate them and use the cash proceedings to pay your creditors before any debt can be discharged.
The law currently states that $16,500 of your home’s equity is exempt or double that amount if you’re married. Also you may exempt up to $2,500 of your vehicles total value. Home items like your furniture, items in your wardrobe and home collectibles may be exempt up to a value that can be determined by your attorney since this also varies per state. Any health or medical aids that you need for treatment or life support that are of high value are also exempt.
Any personal injury compensation, and disability payments that you’re receiving may also be exempt depending on which state you’re in.
Other assets like pension plans in which employees contribute to ERISA qualified plans, or deferred compensation plans, health insurance plans and certain annuities can be considered bankruptcy exempt assets.
Education funds to your child’s college education, or state tuition programs that were started at least one year prior to filing for bankruptcy, can be excluded from the bankruptcy estate. These funds educational funds however must clearly have as a beneficiary a child or grandchild of the debtor.
Can I exempt my house entirely?
Typically no, but in today’s crashing real estate market it is difficult to find a home with a significant amount of equity worth liquidating for the bankruptcy trustee. So presently you may be able to keep your house if the trustee is not interested in selling it, but you must continue to pay the mortgage on it even after you get a discharge since this is a secured debt.
If there’s more equity in the home than the allowed exempt amount of $16,500 or double if you’re married, then it is likely that the trustee will move forward with including the property in the estate and sell it. However if the equity is below the allowed amount then you should be fine just make sure you pay the mortgage. Also remember that the lender is not interested in the house, they’d rather you got caught up on payments and will only proceed with foreclosure as a last resort since this is typically an expensive and time consuming effort for the lender.
Can I exempt my vehicle?
Vehicles normally depreciate in value rather quickly, so unless you own luxury or vintage vehicles that hold good value and are above the allowed exemption value of $2500, the trustee will also probably choose to overlook this asset. Most people own vehicles that they’re either leasing or still paying for and because of the depreciation value of most vehicles it is difficult to consider them in the bankruptcy estate as worthy assets. So if your vehicle is a couple of years old with moderate to high mileage you probably have little to worry about.
When can I exempt everything?
If you’re filing chapter 7, more than likely you won’t have to try too hard to exempt certain things you own since most people who file chapter 7 bankruptcy have already exhausted their own resources to get caught up and failed. Including selling some of those assets. In most cases there were never really any assets to begin with. This is why often chapter 7 bankruptcy cases are no-asset-cases, in which the largest if any assets at all are the individual retirement accounts the filers have through their employers. Even if there are assets that can be liquidated they’re often overlooked due to the exempt assets rules.
There will be cases in which the filer has a significant amount of non-exempt assets and there are legal ways of converting non-exempt assets into exempt assets, these circumstances are unique and this will not apply to everyone who has a lot of assets. This can only be done by a seasoned bankruptcy attorney so do not make any assumptions on your own, this can be very serious if it is determined that you tried to purposely defraud or hinder the proceedings. If this is the case for you, then take this very seriously and talk with a bankruptcy attorney because bankrutpcy excemptions are a very important part of the process and most people simply do not have the knowledge to do this correctly.
Related Posts
- Bookmark :
- Digg
- del.icip.us
- Stumbleupon
- Redit it