Every person who files for bankruptcy is allowed to maintain the minimal possessions thought to be required for the defendant’s post-bankruptcy “new start.”
The schedules submitted to start the case list the debtor’s property as exempt. They become legally binding 30 days after the creditors’ meeting if no challenges are made to those claims. The bankruptcy estate no longer owns the exempt property.
When everything is exempt
For the following reasons, the majority of Chapter 7 cases are no-asset cases, meaning that the debtors do not transfer any assets to the trustee:
- First, the exclusion regimes allow creditors to keep their daily necessities free from creditors’ demands. The purpose of bankruptcy is to start again, but this can only be done if the debtor has something to build on.
- Second, worn furniture and personal items don’t really provide much in the way of value to pay off debts because they have minimal potential for resale.
The majority of families’ main or second-largest asset, pension rights and 401(k) plans, are not included in the inheritance. The debtor does not need to exempt retirement plans in order to maintain them because they are not part of the estate.
Even while IRAs and other retirement accounts are typically excluded, they may constitute estate assets.
How much can I exempt?
The only area where bankruptcy law varies from state to state is with exemptions.
Debtors may choose from the bankruptcy code exemptions in sixteen states. Debtors in certain states have the option of following either federal law or state law. Only the state exemptions are available for the remaining states. For a list of the exemptions you may use, visit state legislation.
Which exemptions apply?
To be eligible to claim a state’s exemptions, you must have resided there for two years prior to filing for bankruptcy in that state.
The exemptions of the jurisdiction in which you resided for the six months after the two-year look-back period are applicable if you haven’t lived there for two years.
How do I calculate what’s exempt?
The quantities in the legislation pertain to the item’s current market value (not its purchase price or its replacement value).
If an object is liable to a foreclosure or a lien, the exemption is calculated using the item’s worth after deducting the amount of the lien or liens (the equity). Some liens can be avoided in order to generate exempted ownership.
NOTE: This is about a reputed and well known law firm which helps you file any cases in bankruptcy in the best way possible. Click on the link to know more