Bankruptcy Property Exemptions
Author: Brown.Walker
The process of bankruptcy offers debtors a clean slate when they are overwhelmed by financial burdens. Once a bankruptcy case is completed, however, the debtor will still need basic possessions and assets to move their life forward. Fortunately, the Bankruptcy Code recognizes these basic needs and provides a variety of property exemptions for debtors. If property is exempt, it will not be subject to the claims of creditors.
Under new bankruptcy law, a debtor will be required to submit a schedule or list of exempt property when they file the bankruptcy petition. The schedule should include a description of the property, specifying the law authorizing the exemption, and list the value of the exemption and its market value. This information allows parties involved in the case to evaluate the exemption claim and submit any legitimate objections within 30 days from the meeting of the creditors. If someone objects, they must prove that the exemption has been improperly claimed.
Every bankruptcy case is evaluated separately but in most cases, the debtor does not have to give up their property or necessary possessions. During and after the closing of the case, the exempted property is protected by law. In fact, not only are you allowed to keep the exempted property, but also the equity, if any, that one may have on the property. Equity is the difference between the value of the exempted property and the remaining debt.
Homestead Exemption
The homestead exemption applies to property used as a residence. Current law limits a homestead exemption to 6,875 if the home was acquired in the 1,215-day period before filing for bankruptcy. Exceptions apply, including when someone upgrades to a more expensive house and transfers equity to the new purchase. The homestead exemption is also limited if it is used to delay, hinder, or defraud a creditor.
Automobiles
The exemption amount for an automobile under the Bankruptcy Code is ,225. The equity in the vehicle is based on its market value less any loans. If the equity is more than ,225, it is possible to apply exemption amounts from other categories, such as the exemption for tools of the trade. If the trustee sells it, the debtor is entitled to receive the exemption amount. It is also possible to pay the trustee the amount above the exemption and keep the vehicle.
Household Items
Federal and state laws provide exemptions for household items of ,775 and 5 for an individual item. However, these types of items have low resale value and most bankruptcy trustees will not view them as a viable source of assets to use in repaying creditors.
Retirement Assets
Debtors can exempt retirement funds under ยง 522(d)(12) of the Bankruptcy Code. The exemption applies to pension, profit sharing and stock bonus plans, employee annuities, Individual Retirement Accounts (IRAs), deferred compensation plans such as a 401(k) account, and certain trusts.
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About the Author
Brian Reed. New york bankruptcy lawyers To consult with New York bankruptcy lawyers who specialize solely on bankruptcy, contact the attorneys at Doyaga and Schaefer at 718-488-7500 or 516-656-7500 for a free consultation.
In TX, do I have to pay delinquent property taxes after filing Chapter 7 bankruptcy and giving up the house?
Beware of mortgage servicing companies! They never paid the property taxes and have accelerated the loan and loaded it with misc. fees. I am considering Chapt. 7 bankruptcy and will surrender the house because there’s no way I can pay the current loan now (it has almost doubled). Will the deliquent taxes attach to the property after bankruptcy or will I still be responsible for them?
Purchaser of foreclosure property responsible for 2nd mortgage forgiven in bankruptcy?
2nd mortgage relieved in bankruptcy & home is now in foreclosure with 1st mortgage bank. If someone buys the property, will they have to pay the 2nd mortgage or is it gone because it was part of the bankruptcy? BTW, the property is in Michigan.
When facing foreclosure will filing bankruptcy save your property?
A friend of mine said that at one time he was facing the loss of his home to foreclosure and resorted to filing bankruptcy in order to retain his property. He assured me that he was able to keep his home by doing this?
Is surrendering a property in bankruptcy the same as foreclosure?
I have been talking to a few attorney’s and they tell me that you can surrender property in either a Chapter 7 or Chapter 13 bankruptcy.
If you “surrender” the property, does it still count as a foreclosure against you? Does the bankruptcy protection, from either a Chapter 7 or 13, protect you from possible lawsuits etc?
I know many people view Chapter 7 as liquidation, but I have been told by many attorney’s you can also surrender in a 13 but people just opt not to.
In a chapter 7 bankruptcy, is a property that I own free and clear with a partner considered exempt?
I am considering filing for chapter 7 bankruptcy. I qualify based on the means test, but I purchased an investment property with a business partner 2 years ago. there is no mortgage on the property and it’s only worth about 40k. How would a trustee normally handle this property since there is another owner who is not filing for bk and is not my spouse? does that make that property exempt?
You can surrender property under either Chapter. It’s the same as a foreclosure or repossession. The bankruptcy protects you from any deficiency judgment.
The taxes responsibility is seen as a lien, just like the mortgage and will follow the house. The lender who is foreclosing will have to assume the tax liability if they are transferring title to their name.
Bankruptcy debt forgiveness may not be as easy as you are thinking since the laws changed, so you might want to simply think about offering the deed in lieu of foreclosure to get back on track.
No, neither the fact that you own it with a partner nor the fact that you own it “free and clear” makes it exempt. Florida (which your screen name seems to indicate you may be from) has an exceptionally generous homestead exemption, but that is for a homestead in which you are living.
See a local bankruptcy attorney to discuss how this property may be affected by your bankruptcy filing, and also to discuss other options if the Ch 7 option does not sound feasible.
who ever buys the property isn’t buying the debt. they just buy the property. the debt has to be dealt with prior to the sale. bankruptcy can sometimes wipe out a line of credit or second mortgage look at the bankruptcy discharge paperwork to be sure. good luck