If you cannot afford to pay all your financial obligations, filing Chapter 7 bankruptcy can help by liquidating all your assets and eliminating your debts. But, there are some items of personal property that you can keep as exemptions after bankruptcy. As each state has different rules and regulations for the exemptions they allow, you will need to find out if your resident state will let you use the federal or state exemptions in your Chapter 7 bankruptcy.
Here is a list of states that allow you to use the federal exemptions and two important personal property items you can keep as federal exemptions when you file a Chapter 7 bankruptcy.
States Allowing Federal Exemptions in Chapter 7 Bankruptcy
Not every state will allow you to use the federal exemptions to protect your assets when you file Chapter 7 bankruptcy. The following states will allow you to choose between using their state bankruptcy exemptions or the federal exemption list: Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin.
Because you will need a place to live after your Chapter 7 bankruptcy, the homestead exemption can protect your primary home in a bankruptcy situation. This exemption allows you to keep up to a certain amount of your home's equity, depending on the state you live in. Under the federal homestead exemption, you can keep up to $22,975 of your home's equity after a bankruptcy.
Some states will give you a much larger homestead exemption than the federal exemption amount, depending on the state regulations. For example, Delaware's exemption protects up to $125,000 of your home's equity, and Nevada protects up to $550,000, but Georgia only protects $21,500 of your home's equity. So, in Georgia it can be more beneficial for you to use the federal exemptions in your bankruptcy.
You can calculate your home's equity by subtracting any mortgages from the current market value of your home. A current market value can be calculated by a real estate appraiser or estimated by a local real estate broker. If your home's equity is equal to or less than your state's homestead exemption amount, you will be able to keep your home after your bankruptcy is discharged. Otherwise, the bankruptcy trustee will sell your home and you will get the amount of equity protected by the homestead exemption.
After your home, your vehicle can be a pretty important part of your life, especially when you need it to get yourself to and from work each day. It can be nice to know if you will be able to keep your vehicle when you file Chapter 7 bankruptcy, or if the trustee will sell it to pay off some of your bankruptcy debt.
If you live in a state that allows you to use the list of federal bankruptcy exemptions in your Chapter 7 bankruptcy, you can keep your vehicle if its market value is $3,675 or less. Otherwise, go by your state's exemption amount.
You can figure your vehicle's market value by going online to Kelley Blue Book and entering in your vehicle's information and condition. Then, subtract the amount of any lien against your vehicle to get your vehicle's total value. If you are not paying on a lien, the value you got from Kelley Blue Book is your vehicle's market value.
When you are considering your bankruptcy options in a financial crisis, always consult with a bankruptcy attorney before making any decisions. A bankruptcy attorney can explain all your options in bankruptcy and what the process would entail.