Exemptions in a Chapter Seven Bankruptcy Estate

Written by Adam Peck Category: Nursing Homes January 23rd, 2013 2 min read

Proceedings under Chapter 7 in Bankruptcy call for a liquidation of the debtors assets. However, there are assets that are exempt from liquidation. The exemptions that are available to debtors depending on where they live and whether their state has opted out of the exemptions available in the federal statute or if they provide exemptions in addition to those in the bankruptcy law.

Options to Keep Your Property
One way to keep property under Chapter 7 is to make sure that you have not over valued property when listing exemptions.

For instance, your household goods should be valued at a distressed sale value.
Make sure you have used any state exemptions that may be available
Property that can be classified as tools of your trade are usually exemptible up to a certain value.
If your state allows federal exemptions there is a wild card exemption under Section 522 that allows a debtor to exempt property that has not already been exempted under other sections of the bankruptcy code.
Is Your Property worth Liquidating
Another way that you may be able to keep property when Chapter 7 exemptions are used up is dependent upon the Bankruptcy trustee. Some property may be too expensive to liquidate which may cause the trustee to abandon it. For example, if your state exemptions allow you to keep a car worth $3500 but the car is worth $4500, the $1000 difference in value may be reduced to less the $500 once the expenses of the selling it are deducted. Five hundred dollars to be divided between 12 creditors is not worth the trustee’s time to administer. If the trustee abandons the property to the debtor the debtor keeps property worth more than the exemption available.

Exemptions in a Joint Bankruptcy Case
If you are married and you file a joint petition in bankruptcy the amount of your exemptions are doubled. Do not forget this when exempting property it can increase your exemptions and allow you to protect property in the bankruptcy estate.

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Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.