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Chapter 7 Bankruptcy

Assets You Can Keep In Spite Of A Chapter 7 Bankruptcy

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The assets that you can keep are called "exempt property."

Exempt property varies according to the state in which you live.

  • Most states follow federal law regarding the types of assets you can keep, but differ in the amounts. Under federal law, exempt property includes:
  • $18,450 of equity in your home.
  • Disability, unemployment, or insurance benefits.
  • Retirement plan funds.
  • $475 in any particular item or $9,850 total worth of household items including household goods, wearing apparel, appliances, books and musical instruments (usually determined at thrift-shop prices.)
  • Tools, equipment, and books worth in total up to $1,850 that are related to your profession.
  • An automobile worth up to $2,950.
  • Jewelry worth up to $1,225 per person filing.
  • Professionally prescribed health aids.
  • Whole life insurance that has a cash value of up to $9,850.
  • Term life insurance.
  • In some states, you can choose to use either the federal or state definition of exempt property.
  • In other states, you have to follow state law.

For example, in New York, you can keep home equity of up to $20,000, while in Florida a home is usually exempt regardless of its value. People have been known to move to Florida and purchase a home worth several million dollars to take advantage of the law and protect that much money before declaring bankruptcy.

Normally property which is not exempt and which has a reasonable amount of equity is surrendered to the Trustee in Bankruptcy. If you want to keep some non-exempt property, you can pay the trustee its fair market value or, if the trustee agrees, swap some exempt property of equal value for the nonexempt property.

To learn about the bankruptcy laws in your state, including exemptions, visit www.lawdog.com/state/laws.htm offsite link , click on your state, then click on the box that says bankruptcy courts.


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