Bankruptcy Exemptions

One of the big concerns of consumers who are considering bankruptcy is that they will lose all of their property. In fact, the “I can’t file for bankruptcy because I will lose everything I own” myth is one of the biggest misconceptions out there about the bankruptcy process. Rather than automatically losing all of your property, the bankruptcy court compares your assets against the applicable exemptions for your state to determine whether there is anything to distribute to creditors. The majority of people who file for personal bankruptcy are able to utilize exemption laws to retain all of their property through the process. Each state, as well as the federal system, have bankruptcy exemption laws which are designed to protect property. Some states, such as New York, only allow debtors to use their state exemption laws. Others, such as New Jersey, allow debtors to choose between either state or federal exemptions. Certain types of assets, such as IRAs and 401(k) accounts, are protected by federal law regardless of which exemption regime applies. Exemptions are rooted in public policy, with the idea being that it is unfair to allow consumers to shed unmanageable debt and be left with no property with which to start over. As a result, exemption laws designate certain types of property, up to specified dollar amounts, as exempt from the claims of creditors and the trustee. For example, Florida has an unlimited homestead exemption for long-term residents. This means that, in the event a Florida resident were to file for bankruptcy, their home would be exempt. They would not lose their primary residence regardless of its value. Similarly, the state of Illinois allows debtors to protect up to $2400 of equity in a car. This means that if you own a car worth $10,000 that has a loan of $8,000, you can file for bankruptcy in Illinois and keep your car. In this example, your $2000 of equity is under the maximum of $2400 allowed under the exemption statute. Even if the hypothetical changed so that there was $3,000 of equity in your automobile, you still would have the option to retain your car. Although bankruptcy trustees can liquidate property to access its nonexempt value, doing so requires a great deal of time and effort. In many cases, trustees are willing to enter into Cash Settlements with Debtors Rather Than Taking the Time To Sell Their Property. Exemption laws vary greatly by state, it is usually a good idea to meet with a local bankruptcy attorney to discuss how your property will be affected. Below, we organized a library of articles that touch on the subject of bankruptcy exemptions. We hope these articles will be a valuable resource as you weigh your options. Thank you for visiting the National Bankruptcy Forum.

Chapter 7 Bankruptcy in Hawaii

Chapter 7 Bankruptcy in Hawaii: What You Need to Know

Hawaii is famous for being a tropical paradise. The only state in the United States made up entirely of islands, Hawaii is home to lush green rainforests, scenic beaches, and active volcanoes that attract tourists from the continental U.S. and around the world. However, not all is as sunny in the Aloha State as its […]

Georgia Bankruptcy Exemptions Chapter 7

Chapter 7 Bankruptcy in Georgia: What You Need to Know

Georgia, the largest state east of the Mississippi river, is famous as the nation’s foremost producer of peaches, pecans and peanuts. It was one of our original colonies, and back in 1776 its population was 40,000 —compared to today’s population of 10,310,371, making it the eighth-most populous state in the nation. The Atlanta metropolitan area is the ninth-largest […]

Delaware Bankruptcy Exemptions Chapter 7

Chapter 7 Bankruptcy in Delaware: What You Need to Know

Delaware calls itself the First State because it ratified the U.S. Constitution before any other state, in early December 1787. In the last century, it has also become first in the minds of many entrepreneurs when deciding where to incorporate their businesses. Today, Delaware is home to more corporations, limited liability companies, and business partnerships […]

Connecticut Bankruptcy Exemptions

Chapter 7 Bankruptcy in Connecticut: What You Need to Know

Connecticut is one of the original states that was pivotal to the American Revolution and forming of our federal government. Although it’s technically the southernmost state in New England, several of its cities are considered part of the bustling New York-New Jersey metropolitan area. Generally a well-to-do state, Connecticut had the highest per-capita personal income […]

Alabama Bankruptcy Exemptions

Chapter 7 Bankruptcy in Alabama: What You Need to Know

Aside from football, Alabama might best be known for its rich agricultural history, the birth of Booker T. Washington’s “Atlanta compromise” in the civil rights movement, and being a big employer for colleges and the military. The Heart of Dixie grew its economy after World War II to diversify its interests past farming, though per capita […]

Colorado Bankruptcy Exemptions Chapter 7

Chapter 7 Bankruptcy in Colorado: What You Need to Know

Last updated May 18, 2017. Colorado is a gorgeous state. If you’re the outdoorsy type, you’ll feel right at home here among the Rocky Mountains, the desert, and river canyons. If you love a robust downtown, you’ve got Denver, which has consistently ranked as one of the top places to live in America. However, while Colorado […]

Alaska Bankruptcy Exemptions

Chapter 7 Bankruptcy in Alaska: What You Need to Know

Last updated May 18, 2017. While the United States has mostly come out of the Great Recession, Alaska is still experiencing its own due to a steep drop in oil prices and resulting budget crisis in 2015. According to a recent economic confidence survey, Anchorage residents are feeling more pessimistic about the local economy today than they […]

Livestock Bankruptcy Chapter 12 Farmers

Can I Keep Livestock and File Bankruptcy?

People who are considering bankruptcy often wonder whether they will be able to keep their property, and farmers are no exception. People who keep livestock and grow crops for a living are often worried that by filing for bankruptcy, they will end up putting themselves in a position where they will be forced to part […]

Massachusetts Bankruptcy Exemptions Chapter 7

Chapter 7 Bankruptcy in Massachusetts: What You Need to Know

You’re in debt and are doing research online, so you’ve probably already encountered some general information about bankruptcy. But what do you need to know about bankruptcy if you’re filing in Massachusetts? Before you dive into your Massachusetts research, make sure that MA law applies to your case. If you just moved to MA, your […]