Consider Exemptions When Contemplating Bankruptcy
While filing for bankruptcy protection can seem to be one of the great things that
is afforded to you as a US citizen, it can also feel humiliating, scary, and make you wonder if there is any way back out of the hole. However, many people do not fully understand the entirety of the exemptionsboth state and federalthat are available to those who receive bankruptcy protection. So before you pass on filing bankruptcy because you believe you may lose your house or car or clothes, you should read and find out just what you are allowed to keep.
Bankruptcy is Federal
You must first understand that bankruptcy is a federal matter, which just means that it is not regulated by states. Your hearings will be held in the federal courts. So no matter which state you live in, you have the opportunity to file for bankruptcy. But this doesn't mean that you have to use the federal exemptions. Here's where it gets tricky. Some states will allow you to choose whether or not you want to use the federal or state exemptions. You cannot use both in any state.
Here are the states where you can choose federal or state exemptions:
Arkansas
Connecticut
District of Columbia
Hawaii
Kentucky
Massachusetts
Michigan
Minnesota
New Hampshire
New Jersey
New Mexico
New York
Pennsylvania
Rhode Island
Texas
Vermont
Washington
Wisconsin
In the 33 other states, you have to use the state exemptions. There is no choice in the matter. But the good news is that most states have some pretty decent exemptions.
While it would be too long of a list to mention every state and each of its exemptions, here is an idea of what you will be looking at in pretty much every state.
Homestead Exemption. There will be a very specific number for each state, say $100,000 for your homestead. If you owe more than this on your home or property, it will be sold and the equity will be returned to you. If you owe less than the amount or the home is worth less than this amount, then you get to keep it. This number is higher for states like New York and California, and lower for states like Mississippi and North Dakota.
Personal Property. There will also be a real money exemption on personal property, such as vehicles, jewelry, clothes, books, computers, etc. Essentially, every state will have a specific number and you can keep that amount of your personal property. Often cars under a certain value are exempt on the belief that if you can't drive to work, you can't pay your bills.
Weird Stuff. There are also some weird things on some state lists, such as exempting coffins, goats, chickens, bibles, pigs, dogs, etc. Some of these exemptions have been on the books for a long time, so weird things are on there (looking at you, New Hampshire).
Truly, what this article is here to do is relieve some of your stress if you think you just lose everything in bankruptcy and have to start over. This is hardly the case. There are exemptions and in many of the states the exemptions are quite fair and reasonable. So investigate the specifics of your state so that you know exactly what you are up against.
by: Dale Franchise
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