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

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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.

Will they take my property after I file bankruptcy?

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Exempt
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One reason people find themselves in the position of wanting to transfer their assets before filing for bankruptcy is that they are afraid the bankruptcy trustee will take their stuff after they file. But you might not need to worry about that, especially in New Jersey.

Why not? Because you might be able to declare and exempt all (or most) of your property.

What does it mean to “exempt” your property? Generally, once you file for bankruptcy, a “bankruptcy estate” is created, which contains all of your non-exempt property. The trustee can decide what to do with the property in the bankruptcy estate – such as whether to sell it for the benefit of your creditors.

A bankruptcy “exemption” refers to the legal means of keeping your property outside of the bankruptcy estate.

In order to claim an exemption for property you own, you specifically list the property on the bankruptcy papers, the property’s value, and the specific statute section allowing you to exempt that piece of property. This process should be used for all property – including all personal property, such as furniture – so that the trustee cannot claim it for the bankruptcy estate. If you don’t list it and exempt it, you may lose it.

New Jersey gives you the choice to use either the Federal exemptions or the New Jersey exemptions. And the Federal exemptions are quite generous.

In New Jersey and looking at a 7? Call me at 201-676-0722.

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