Bankruptcy is a scary thing. Many people are afraid of filing bankruptcy simply because they believe that the court will take everything that they own. This is simply not true. Each state has laws that decide what items are exempt (what you can keep) and nonexempt (what you cannot keep) when you file bankruptcy.
California is unique in that there are two separate options for what you keep. Which option is right will depend on your own individual circumstances, like what you own and what you owe. Along with the state exemptions, you may be able to use federal exemptions to protect your property as well. Therefore, it is always in your best interest to consult with an bankruptcy attorney regarding your options in bankruptcy.
Here are some items that are exempt in a Chapter 7 Bankruptcy*:
Your homestead property is the house that you own and that you live in. You can only have one homestead. California bases your homestead exemption on the amount of equity of your property. The amount of equity is the current value of the home minus the amount that you owe for your property. The amount of equity that you are allowed to keep is based on a variety of factors including your marriage status, age, and your income.
Personal Property are all the items that you own that are not real estate. Some of the personal property items that you can keep in a bankruptcy include appliances, furnishings, clothing, food, jewelry, heirlooms, and your motor vehicle. However, there are restrictions on the amount of equity that these items can have. The amount varies depending on which exemption option you choose.
Certain benefits including Social Security, Disability or Health benefits, life insurance benefits, veterans’ benefits, and public assistance may be kept in a bankruptcy. Some pensions and retirement plans (like IRAs) may also be kept in certain situations. Other benefits such as student financial aid, unemployment, and worker’s compensation may also be exempt from bankruptcy. Lastly, alimony and child support may be exempt.
Exemptions for Professionals
The law allows you to keep your professional licenses in a bankruptcy. There are also rules in place to allow you to keep a certain value of your tools of trade, which are items such as tools, books, equipment, and motor vehicles for your business. You may also be entitled to keep a percentage of your wages. There are also a wide variety of exemptions specifically for public employees.
If something that you own is not included in the exemptions above, it does not mean that the court will automatically take it from you. You will usually have the option to keep the property by paying the trustee the amount of money that the property is worth.
As stated before, exactly what and how much you get to keep will depend on your situation and which system of exemptions is right for you. If you have found yourself in debt, please seek legal advice as soon as possible to determine your rights and options in bankruptcy, including which of the above exemptions may apply to you.
For further information or to schedule an appointment with one of our highly experienced and successful bankruptcy attorney in Los Angeles at Vokshori Law Group please call 855.855.2608 or visit www.Voklaw.com.
*These exemptions were in place at the time of writing this blog. The types of property and the amounts are constantly changing over time. Please consult a legal professional regarding what you would be able to keep in a bankruptcy.