"Straight" Bankruptcy: Chapter 7
What are exempt assets?
These are assets that you must list on your Statement of Financial Affairs and schedules and that you may shield from your unsecured creditors. The assets that you may protect in this way are defined by federal and state law. In about fifteen states you may chose either of the two laws, while in most states you may use only the state exemptions. Exemptions vary widely. For example, under the federal statute a couple filing jointly may exempt a total of $32,300 in equity in their home, $16,500 for each of them. Thus, if the home is worth $65,000 and has a $30,000 mortgage, creditors can claim only $2,700 (the difference between the equity of $35,000 and the $32,300 exemption).
In contrast, Florida allows a homestead exemption that protects from creditors a debtor's home and property so long as it does not exceed half an acre in a municipality or 160 acres elsewhere. Thus, an investment banker who filed bankruptcy has been able to retain a beachfront home reportedly valued at $3.25 million. In Georgia the homestead exemption is limited to $5,000. Similar variations among the states are found concerning a broad array of other exempt assets such as autos, jewelry, household furnishings, books and tools of the debtor's trade.
Under the new bankruptcy law, you may not be able to take advantage of a high homestead exemption in your state. If you bought your home within 40 months of filing for bankruptcy, you can exempt no more than $125,000 of its value. Of course, if the homestead exemption in your state is lower, the lower exemption applies.
>>What does Chapter 7 bankruptcy involve?
>>Am I eligible to file for bankruptcy under Chapter 7?
>>How does the means test work?
>>What steps do I need to take before filing for bankruptcy?
>>How does a Chapter 7 bankruptcy case begin?
>>What do I have to tell about my finances?
>>Will I lose some of my assets if I file for Chapter 7?
>>What are exempt assets?
>>What are nonexempt assets?
>>May I use Chapter 7 bankruptcy to get rid of all my debts?