What Property Can I Keep?

In a chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors.

It is important to check the exemptions that are available in the state where you live.  (If you moved to your current state from a different state within two years before your bankruptcy filing, you may be required to use the exemptions from the state where you lived just before the two-year period.)

In some states, you are given a choice when you file bankruptcy between using either the state exemptions or using the federal bankruptcy exemptions.  If your state has “opted” out of the federal bankruptcy exemptions (Kansas has), you will be required to chose exemptions mostly under your state law.  However, even in an “opt-out” state, you may use a special federal bankruptcy exemption that protects retirement funds in pension plans and individual retirement accounts (IRAs).

If you are allowed to use the federal bankruptcy exemptions, they include:

  1. $20,200 in equity in your home;
  2. $3225 in equity in your car;
  3. $525 per item in any household goods up to a total of $10,775;
  4. $2025 in things you need for your job (tools, books, etc.);
  5. $1075 in any property, plus part of the unused exemption in your home, up to $10,125;

Your right to receive certain benefits such as Social Security, unemployment compensation, veteran’s benefits, public assistance, and pensions–regardless of the amount.

The amounts of the exemptions are usually doubled when a married couple files together.  Again, you may be required to use state exemptions which may be more or less generous than the federal exemptions.

In determining whether property is exempt, you must keep a few things in mind.  The value of property is not the amount you paid for it, but what it is worth when your bankruptcy case is filed.  Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

You also only need to look at your equity in property.  That means you count your exemptions against the full value minus any money that you owe on mortgages or liens.  For example, if you own a $50,000 house with a $40,000 mortgage, you have only $10,000 in equity.  You can fully protect the $50,000 home with a $10,000 exemption.

While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind.  In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law.  In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.