Who Can Claim Bankruptcy Exemptions?
Only individuals can claim exemptions when filing bankruptcy. The exemptions are not available to businesses that file Chapter 7.
When married or civil union couples file a joint bankruptcy, each spouse can claim the property they own, and the exemption amounts may be combined for joint property.
What Happens to Non-Exempt Property?
Property not covered by a bankruptcy exemption is non-exempt. That means the trustee can take it to pay your creditors. Your attorney will negotiate with the trustee to settle disputes about the value of your non-exempt property and the amount remitted to an unsecured creditor.
If your property is exempt, but the exemption is less than the value of the property, the trustee will pay you the exemption amount before taking the property. In some cases, the trustee may allow you to “purchase” the non-exempt equity in your property. For example, if your car is worth $5,000 and your exemption amount is $3,500, you can pay $1,500 to buy and retain your vehicle. Your attorney will advise you whether to purchase a non-exempt asset.
What Happens to My Home Mortgage and Car Loan?
Secured creditors with an interest in your property retain their claims. That means your mortgage lender can still foreclose on your home if you are behind on your mortgage payments. And, the bank that financed your car can still repossess it if you have not made your monthly payments. In the short run, however, the bankruptcy automatic stay will prevent any creditors from taking action until they receive permission from the bankruptcy court.
Should I Use the Federal Bankruptcy Exemptions or State Bankruptcy Exemptions?
The federal Bankruptcy Code applies to cases filed nationwide. However, the Bankruptcy Code allows individual states to enact bankruptcy exemptions specific to that state. Some states have elected to create state-specific exemptions, and other states allow debtors to choose between federal exemptions and state bankruptcy exemptions. In New Jersey, Chapter 7 Bankruptcy filers can choose the federal exemptions or New Jersey’s state-specific exemptions. In most cases, the federal exemptions are the best option.
So, Do Debtors Lose Property in a Chapter 7 Bankruptcy Case?
Most Chapter 7 cases are “no-asset” cases. That means there is no property the trustee can take and liquidate. In “no asset” cases, Chapter 7 debtors kept everything they own.
When you meet with Ernest G. Ianetti, Esq., we’ll discuss your financial situation and how bankruptcy can help you get relief and get out of debt. We’ll carefully review your exemptions to maximize your results. At the Law Office of Ernest G. Ianetti, Esq., we take pride in assisting our clients to achieve the best outcomes.
The Law Firm of Ernest G. Ianetti, Esq. has over 30 years of professional experience. If you are considering Chapter 7 bankruptcy, we can help you. We’ll work with you, the trustee, and your creditors to ensure your Chapter 7 case succeeds and you keep your property. To schedule a FREE Consultation, click here.
*The code references are to 11 U.S.C. (Title 11 of the United States Code).
