How to protect important assets during bankruptcy?

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How to protect important assets during bankruptcy?

Bankruptcy is an unfortunate financial condition and safeguarding or holding on to some near and dear assets can be a very difficult task. Chapter 7 bankruptcy code especially is not very suitable for people who want to hold on to their assets. However, with the help of exemptions, certain ordinary and modest assets can be protected and prevented from the liquidation process. These may include clothing, home, car, household stuff, tools used in the business/profession, etc. To learn more about bankruptcy codes, log on to Recovery Law Group now. The exemptions can help in protecting the assets which you might not be able to safeguard otherwise during bankruptcy. One such exemption is the wildcard exemption.

What is the Wildcard Exemption?

Wildcard exemption tries to value sentimental and emotional feelings in addition to basic necessities. The best examples could be some of your sports collections, fan collections, grandmom or ancestral property attachment like a piano or some other asset with a financial value that can be tagged with sentiments or emotions. While every state differs slightly in the type of exemptions they offer, other states might provide a choice between the federal and the local state exemptions. There is no possibility of mixing and matching what you like or do not like though.

Different type of exemptions and their thresholds

Most exemptions under Federal or state rule are targeted to specific assets. Here is a look at some federal exemptions with their threshold to better understand what assets could potentially be safeguarded-

·         A $25,150 equity in the personal residence

·         A $4,000 of equity in a motor vehicle or an automobile

·         $13,400 worth fair market value of household goods that include clothing, furnishing, appliances, etc. There is a cap of $625 per item. Which means any one item cannot exceed $625 in the cumulative of $13,400.

·         $2,525 worth tools and equipment used in business or profession.

These amounts are valid until 2022. They are bound to change every 3 years based on inflation and other factors. The state exemptions might be slightly higher or lower to the federal exemptions depending on the cost of living and inflation in the particular state. For instance, it can be high for a state like New York while it can be lower for a city like Dallas in Texas. However, by the federal standard, the bankruptcy filer can get a rough idea of which assets, he/she will be able to protect under these exemptions.

Benefits of Wildcard Exemption

The biggest benefit of wildcard exemption is that it is not been limited to any specific type of asset. The choice of property is left to the discretion of the user. The user can decide on whether to use it in his car, expensive painting, jewelry, etc. The other benefit is you can split the threshold amount to multiple assets as per your convenience. The below items can be safeguarded under wildcard exemption rule-

·         Jewelry

·         Spouse and child support

·         Automobile

·         Residential home equity

·         An ERISA verified retirement account

·         Any other justifiable non-luxury asset

What is the threshold?

Most states use the federal exemption threshold which offers an individual an exemption of $1,325. The additional unused amount of $12,575 in the federal homestead exemption can also be clubbed with the $1,325. This threshold doubles up for a married filing joint scenario. The state exemption might vary slightly from the federal exemption. You might still want to confirm the same. Look into some additional terms in the state rule book of select states for using certain exemptions like the wild card exemption. Get in touch with the best attorney in California for your bankruptcy help at 888-297-6203.