When you choose to file a Chapter 7 bankruptcy, one of your biggest concerns is whether you can keep your property. The fact is that it will depend on the state’s property exemptions, which you can use to protect your assets when filing for bankruptcy.
Other states allow residents to choose between the federal bankruptcy exemptions or their own state’s exemptions. However, it is not possible in the state of Nevada, where you need to use Nevada’s bankruptcy exemptions.
The equity in a residential property is considered an asset in bankruptcy. Also, you must have a homestead declaration filed before you file for bankruptcy. The homestead exemption only applies up to $605,000.00 in equity. For example, if your home is worth $800,000.00, and you still owe $300,000.00 on your mortgage, you have $500,000.00 of equity. You will be able to claim the homestead exemption to protect your home because it is below the $605,000.00 in equity exemption amount.
You can protect the equity in your vehicle up to $15,000.00 unless the vehicle is used to transport someone who is disabled. Equity is the current value of the vehicle, minus any loans you have on the vehicle.
Personal Property Exemption
The following are common personal property exemptions:
- All family keepsakes (example: wedding ring) and pictures
- Equity in books, art, musical instruments, and jewelry up to $5,000.00
- Equity in appliances, furniture, electronics, household goods, clothing, home, and yard equipment up to $12,000.00
- Mortgage impound accounts
- Health aids (example: prosthesis)
- Funeral service contract money held in trust
- Equity in one vehicle up to $15,000.00
- One firearm
Public Benefits and Other Sources of Payments
Here is the list of the common public benefits and other sources of payments exemptions:
- Worker’s compensation/ industrial insurance
- Public assistance for children
- Unemployment compensation
- Retirement accounts and benefits
- Aid to a person with a disability, aged, and general assistance
- Payments received under the Social Security Act
- Life insurance benefits
- Child support payments
- Alimony payments
- Personal injury compensation (up to $16,150.00) but this does not include pain and suffering or actual pecuniary losses
- Payment received for wrongful death
- The tax refund that is from the Earned Income Credit
- Money for funeral or burial services
Retirement Accounts and Benefits
The qualified retirement accounts or pensions that are exempted are the following:
- Public Employees’ Retirement Benefits
- RA and Roth IRA (maximum amount does change)
- Funds (up to $500,000.00) if obtained through IRA, pension plan, cash deferment (such as cafeteria plan or health care flexible spending account), stock bonus or profit-sharing plan, and 529 college saving plans (unless the money is deposited after the entry of judgment)
Wages and Income Exemption
The exemption in your wages and income is 75% of your disposable income or 50 times the federal minimum wage, whichever is higher. Low-income debtors may have higher chances to be authorized by a bankruptcy judge.
Tools of the Trade Exemption
The following are the tools of the trade that can be exempted:
- Equity of an armed truck, stock, tools, equipment, and seed – up to $4,500.00
- Arms, uniforms, and accouterments that you are required to keep
- Equity in library equipment, tools, inventory, and supplies up to $10,000.00
- Equity of a cabin or dwelling in a mine, mining claim, cars, implements, and appliances (for working claim only) – up to $4,500.00
These are any personal properties (except real estate) with an amount of up to $10,000.00. Examples of wildcard exemptions are those with sentimental value, such as childhood toy collections and a piano from your ancestors. You can use the wildcard exemption for equity in exemptions that exceed the exemption amount. For example, your vehicle is $25,000.00, but the vehicle exemption is $15,000.00. You can use the wildcard exemption for the excess equity.
It is essential to know what property of yours is exempted when filing for bankruptcy. There are certain risks when you expect to qualify an exemption, but it turns out that you are not. An example is when you have $200,000.00 in equity in your home, and you did not file a homestead declaration; then, there is a possibility that you have to sell your house. You should consult an attorney to file bankruptcy.
Debt Rescue Law can explore all options and assist you in filing for bankruptcy if need be. Call for a free consultation at (833) 707-1234 today.