Exemptions And Chapter 7 Bankruptcy

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Deciding Between Bankruptcy Types

After spending freely for years, I realized that I didn't have enough money to feed my family. I was devastated, and I didn't know what to do. Instead of writing off the problem as something that would go away on its own, I decided to take action. I met with a bankruptcy attorney to understand the process, and I was amazed at how kind, caring, and responsible he seemed. He walked me through what would happen, including how to decide between all of the types of bankruptcy out there. This blog is all about helping you to decide whether or not bankruptcy is right for you.


Exemptions And Chapter 7 Bankruptcy

28 August 2015
 Categories: , Blog

If you are considering filing for chapter 7 bankruptcy, you may be justifiably concerned about how much of your personal property that you stand to lose. Bankruptcy allows your real estate, vehicles, bank accounts and much more to be subject to "surrender," meaning that the property will be taken from you and used to help repay some of your debt. Bankruptcy law allows people to keep a certain amount of their property. To learn more about chapter 7 bankruptcy exemptions, read below.

State or Federal Exemptions?

Bankruptcy law allows some states to set their own exemptions, and some states allow you to choose to follow either federal exemptions or your resident state's laws. In those cases you must choose between the two; you cannot mix state and federal exemptions.

Your Home

Every state has some form of homestead exemptions. These exemptions allow for a dollar amount to be deducted from the home's value. If you live in a state that allows for joint bankruptcy filers to double their exemptions, you have a greater chance of keeping your home.

For example, if your state gives you a $25,000.00 homestead exemption, and if you live in a state that allows double deductions, you could deduct $50,000.00 from the value of your home. If you have less than that amount of equity in your home (your mortgage balance deducted from the appraised value), you may be able to keep your home. In cases where you don't have enough exemptions to keep your home, the bankruptcy trustee could order your home sold to pay your creditors. Keep in mind that the decision to seize your home is based on how much debt you owe. It is unlikely that a trustee would sell a home and recoup $250,000.00 from the sale if you only owed your creditors $75,000.00


The vehicle exemption is similar to the homestead exemption in that the more you still owe on your car, the more likely you are to be able to keep it. The bankruptcy courts are primarily interested in property that is easy to sell and will bring cash to pay your creditors. Very valuable cars that are paid in full will probably catch the trustee's attention. Its may be interesting to note that the trustee in some states earn their pay based on a percentage of debt re-paid.

Personal Belongings

In nearly every state, your personal clothing, jewelry and furniture is exempt. There is nearly no resale value in used personal belongings. The exceptions are very valuable jewelry, fine art, furs and high-value collectibles.

Since bankruptcy exemptions are a little complicated, and because they are so state-specific, your bankruptcy attorney should be consulted for more precise information about what you can keep when you file chapter 7.