Protecting Your Property in Chapter 7 Bankruptcy (Exemptions)

In chapter 7 bankruptcy, exemptions (state- or sometimes federal-laws) serve to safeguard the bankruptcy petitioner’s property. Here’s how: 

Chapter 7 Bankruptcy is a fresh start– it’s not designed to leave you shirtless. In fact, it frees you from debt so you can afford more shirts (and even budget for freshly-pressed and -starched shirts).

San Diego Bankruptcy Lawyer Asaph Abrams: on protecting property in chapter 7 bankruptcy.
Be cool: in bankruptcy, you can keep what matters most.

Chapter 7 bankruptcy permits you to:

Outside of chapter 7 bankruptcy, the borrower is exposed to property loss from liens, levies and garnishments. Within bankruptcy, forfeiture of assets is avoided.

There are ample allowances for what property you can keep in chapter 7 bankruptcy. In San Diego, applicable statutes safeguard all the assets of almost all chapter 7 bankruptcy petitioners IF said statutes are accurately assigned by your bankruptcy attorney.

Be cool: in bankruptcy, you can keep what matters most: your house, your car, your retirement. Alas, bankruptcy isn’t a means to dispose of your spouse’s hideous recliner or that incorrigible cat: you won’t lose those either.

San Diego Bankruptcy Attorney Asaph Abrams explains bankruptcy exemptions.
“Remove thyself from my sun spot, you damn, dirty, domesticated feline!” In chapter 7 bankruptcy, you can even keep your cat (if you’re so inclined).

Now you can’t have your cake and eat it; if you can claim a mint, then you can’t cancel debts sans payment. But your San Diego Bankruptcy Attorney will advise in advance of any risk of loss. The extent of what you can protect in chapter 7 bankruptcy is measured by applicable “exemptions.”

What Are Bankruptcy Exemptions?

Excellent question. Exemptions are laws that describe the values of assets you can protect (exempt) when filing chapter 7 bankruptcy. With secured (financed) properties like houses and vehicles, the relevant value is the equity (i.e. the value after deducting the debt owed on it).

Exemptions vary by state.  If you’ve lived in California for the last 2 years (well… 730 days), you’ll choose from one (but not both) of California’s 2 exemption “systems.”

[Click here, if you haven’t lived here the last 2 years.]

What follow are highlights from California’s 2 exemption schemes:[1]

California Bankruptcy Exemption System 1- Brief Highlights:

  • Homestead exemption (amount of equity you’re allowed in your home):
  • Single = $75,000
  • Families = $100,000
  • Senior/Disabled/other = $175,000
  • Motor vehicles = $3,050 (amount of equity allowed)
  • Jewelry/heirlooms/art = $8,000
  • Tools of trade = $8,000 (per working spouse)
  • Most normal “household goods and furnishings”
  • Most retirement accounts and pensions
  • 75% of your wages received in the last 30 days
  • Exceptions & nuances apply!

California Bankruptcy Exemption System 2- Brief Highlights:

  • Motor vehicle(s)= $5,350 (in equity)
  • Jewelry = $1,600
  • Tools of trade = $8,000
  • Normal household goods and furnishings limited to $675 per item
  • Combined homestead and “wildcard” exemption of $28,225 in any asset(s); may be “stacked” with other exemptions.
  • Most retirement accounts and pensions
  • Exceptions & nuances apply!

How Do Bankruptcy Exemptions Work?

Your San Diego Bankruptcy Attorney will diligently determine the best exemptions for the individual client. Your likable bankruptcy lawyer shall accurately ascertain value and equity, and identify what constitutes (a pretentious, yet pointlessly less-succinct-synonym for the simpler… “is”) an asset: it isn’t straightforward.

Value may be equivocal and experience directs the bankruptcy attorney as to which chattel matters.Bankruptcy attorney Asaph Abrams on protecting your property in chapter 7 bankruptcy.

In assessing whether available exemptions are adequate, your bankruptcy attorney must accurately deduct encumbrances as well as factor in hypothetical trustee- and sale-costs that reduce the asset’s true worth.

And property in bankruptcy is broadly defined; it encompasses tangible, intangible, contingent, unliquidated and even future interests. The San Diego bankruptcy lawyer will comprehensively categorize and define the client’s property: if it isn’t scheduled, then it can’t be exempted.

How Do Exemptions Play Into Chapter 13 Bankruptcy?

In Chapter 13 Bankruptcy, there is no liquidation or loss of property. But in chapter 13 we must still “exempt” your assets (using the above schemes) since exemption affects the chapter 13 bankruptcy payment threshold. If you file chapter 13 bankruptcy and have non-exempt assets that could have been sold if you had alternatively filed chapter 7, then the hypothetical sale proceeds effect a minimum chapter 13 payment to creditors.


Bankruptcy Exemptions For New Californians:

As the gubernatorial Austrian Oak would intone, “Welcome to Cali-fohnia!” If you’re new to California (within the last 2 years), we need to look at the applicable law for the state in which you resided during the majority of the 180-day period preceding the 730-day period prior to your bankruptcy filing. Then a determination is made whether to use the previous state’s exemptions or alternative Federal exemptions (which are similar to California’s System 2), if available. No, we don’t make this stuff up; please call to see what this gobbledygook means for you: (858) 240-6751.
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Your San Diego bankruptcy lawyer will help you rebound.
Member: National Association of Consumer Basketball Attorneys.

[1]

Quoted values are current as of April 1, 2016.  Certain exemption dollar-amounts adjust at least triennially (that was a Word of the Day on my smart-aleck smart-phone app) on April Fools’ Day (this dubious date-selection begs one to double-check bankruptcy exemption updates delivered by jokers).

There’s been a proposed California law (Senate Bill 308) to improve upon existing exemptions; it includes a meaningful measure to increase the homestead exemption up to $300,000. SB 308 had passed the Senate and the Assembly Judiciary Committee (on June 30, 2015). At that time there were “only” four more legislative steps to go. On September 9, 2015, the California Assembly shot it down. The ones who voted “no” swear it was in self defense; they say the bill was a capital offense (in the sense of an offense to their capital).

The NACBA (North American Chinese Basketball Association National Association of Consumer Bankruptcy Attorneys) Legislative Director had stated that Senate Bill 308 must still pass the below next-steps prior to being adopted:

  • Assembly Appropriations Committee;
  • Approval on the Assembly floor;
  • Return to Senate for agreement to Assembly modifications;
  • Governor’s signature;
  • Ratification of rider for legalization of pot;
  • Benefit at George Clooney’s house;
  • Statewide referendum;
  • Stamp of the Committee for Appointing Committees to Appoint Committees.

Alas, legislation takes longer than it takes Vincent D’Onofrio-as-Wilson-Fisk to finish a sentence.
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