If you are worried about losing all your belonging when you file for bankruptcy, you are mistaken, say lawyers of Los Angeles based law firm. The state exemptions can help protect your exempt property. Unfortunately, the non-exempt property is liquidated in chapter 7 while you can keep it in chapter 13 if you can pay for them through your 3-5 years repayment plan.
Importance of exemption in chapter 13 bankruptcy
In chapter 13 bankruptcy you can even keep non-exempt property by paying for them through the court approved monthly repayment plan. Generally, the bankruptcy trustee oversees the distribution of payment. The payment per month is calculated based on several rules. For people keeping non-exempted property, their unsecured creditors should receive an amount equivalent to what they would have gotten in a chapter 7 bankruptcy, when the property would have been liquidated. Thus, the amount that creditors must receive is equivalent to the worth of the non-exempt property. Depending on how much you can afford to protect your non-exempt property and the duration of your repayment plan, your monthly payment is calculated.
Your exemptions are determined by your state’s law
The bankruptcy exemptions vary with every state. Usually, states ask bankruptcy filers to opt for state exemptions, however, some of them allow debtors to choose between state and federal bankruptcy exemptions. You can use the state exemptions if you have lived in the state for a long time. However, if you have recently shifted (within past 2 years) to another state, you should consult bankruptcy lawyers to know which state’s exemption you can use.
Calculating value of non-exempt property
The primary step to take while filing for bankruptcy is listing all your property and finding their value. You need to determine what is exempted and the value of the non-exempt property in case of state or federal exemptions. If your state allows exemption for a musical instrument of $4,000, then you can keep the guitar worth $1,500 without paying anything. However, if no such exemption is allowed, you must pay your unsecured creditors a minimum of $1,500 for it through your repayment plan.
Calculations of a chapter 13 repayment plan is complex since you need to know the exemption status of your property as well as the amount to which it is exempted. You can seek the help of an experienced bankruptcy lawyer by calling (888-297-6203).