Understanding chapter 7 bankruptcy exemptions
To begin with, it is important to understand that Chapter 7 bankruptcy exemptions are essentially a list of assets which a debtor is allowed to “exempt” (keep) in his or her bankruptcy case. Assets that are not exempt may be liquidated during the Chapter 7 bankruptcy process for the benefit of the debtor’s unsecured creditors. Chapter 7 bankruptcy exemptions vary from state to state. In some states, Chapter 7 debtors have the option of choosing either their state exemptions or federal bankruptcy exemptions. A bankruptcy attorney in your state will be able to assist you in determining which Chapter 7 bankruptcy exemptions are available to you.
Chapter 7 bankruptcy property exemptions
When contemplating filing a Chapter 7 bankruptcy, it is important that you compile a list of your personal property and assets. Personal property includes clothing, jewelry, electronics, appliances, furniture, tools, etc. With most state exemptions, individuals are allotted a general personal property exemption as well as specific exemptions for such things as jewelry, automobiles, life insurance, and their homestead if applicable. In order to calculate the equity of an asset for exemption purposes, the fair market value of the asset will need to be determined first. Secondly, any liens will need to be subtracted from this value in order to determine if the asset has any liquidable value. If the liquidable value of the asset is more than the allowed exemption, the debtor will either have to surrender the asset to the trustee or buy it back, having to pay the overage amount of the exemption.
When an individual files for Chapter 7 bankruptcy, he or she will file a schedule (a list) of all exempted property along with its market value and exempt value. This will allow the Chapter 7 Bankruptcy Trustee to see if there are any assets to liquidate. In addition, creditors may object to a debtor’s exemptions if they feel that the asset should not be allowed to be exempt. However, the burden of proof is on the creditor as to whether or not the exemption should be allowed.