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Will I be able to keep anything when I file for bankruptcy?

Can you keep your property through a Chapter 7 bankruptcy? The short answer to this question is: Maybe. It depends on your situation.

This is what something called “exemptions” are for. The way I explain it to clients is this: When you file for bankruptcy, something called the “bankruptcy estate” is created, kind of like the estate that is created when someone dies. Everything in the that estate temporarily comes under the Chapter 7 trustee‘s control. The trustee can sell estate assets to pay off your creditors. If something is NOT in the bankruptcy estate, it will not come under the trustee’s control.

How do you keep your stuff out of the bankruptcy estate? You list all it in your filing. Then you cite to the statutes allowing you to exempt each item from the estate. The laws allowing you to keep property out of the bankruptcy estate are generally called “exemptions”.

Does that mean you can exempt anything from the bankruptcy estate, no matter how expensive the it is? NO. Unfortunately not. Exemptions are limited. And they vary greatly by state.

How are exemptions limited? Generally, they are limited by type of property and by amount. For example, you might find that the statute that applies to jewelry might be limited in amount to $1500. This means you could exempt only $1500 worth of jewelry from your bankruptcy estate (that’s just an example – I made it up, so don’t rely on that statement for jewelry!). Limitations like this can make it difficult (and sometimes impossible) to exempt very valuable items like real estate, newer cars, or valuable collectors’ items.

How do you value your items? Generally speaking, you value your property by determining its resale value – how much could you get for it at a garage sale or on an auction website?

How do I exempt items that I don’t want to list in my papers? You don’t. Unlisted property is not exempted.

The bottom line is that you need to speak to a bankruptcy attorney in the state where you live to find out what the exemptions limitations are. And don’t make the mistake of transferring property to someone else just to keep it out of the bankruptcy estate.

If you are in New Jersey and need a bankruptcy attorney for a potential Chapter 7, please call Jennifer Weil at 201-676-0722 for a free telephone consultation or email me at jweil@jenlawyer.com.

Photo by infomatique.

One Response to Will I be able to keep anything when I file for bankruptcy?
  1. Do you need a bankruptcy attorney? | Bankruptcy
    February 27, 2012 | 2:59 pm

    […] Sometimes even the most basic considerations that you take for granted are open to question, such as whether it is a good idea for you to file for bankruptcy.  Believe it or not, there are some people who just should not file for some reason – for example, perhaps they would lose an important asset if they were to file.  Most people who are not consumer bankruptcy attorneys would be unaware of whether that situation would apply to them.  And of course, the opposite situation often crops up – where people think they would lose everything after filing for bankruptcy when actually, all of their assets would be protected by the exemption laws. […]

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