Exemptions or exempt property in a United States bankruptcy case is where a debtor is permitted to keep certain property from unsecured creditors such as personal belongings, your home, vehicle, tools needed to perform your job, or retirement plans. The amount of property a debtor may keep depends on the state in which they live. The goal of exemptions is to not leave a debtor destitute by seizure or liquidation and allow them a fresh start to get back on good financial ground again.
The federal Bankruptcy Code provides uniform exemptions but allows a state to choose to substitute its own exemptions. Some states have a notable difference in exemptions, you must choose either the state or federal exemptions, so it is good to talk to a bankruptcy attorney to find out which option will give you the greater benefit.
Individual debtors may claim exemptions in all cases. When you file bankruptcy, most notably Chapter 7 bankruptcy, you may keep the exempt property during and after your bankruptcy case. Corporations filing Chapter 7 will result in incomplete liquidation, they are not entitled by law to use exemptions.
In Chapter 13 bankruptcy cases, exempt property is deducted from the liquidation value of the estate. Your income is added to the value of your nonexempt property to determine the amount for the repayment plan. The more exemptions you can claim, the less money you will be required to pay to your creditors. You will get to keep your property if the value is equal to or less then the exemption amount.
If a property is nonexempt, it is given over to the trustee assigned to your case which may sell it to divide among your creditors. Most of the time individuals that file for Chapter 7 bankruptcy don’t lose their assets.
If you are considering bankruptcy and would like to know what property you will be able to keep contact a Houston bankruptcy attorney to find out what exemptions you are entitled to under the law.