A Brief Overview of Bankruptcy Exemptions

Bankruptcy exemptions are key considerations in both Chapter 7 and Chapter 13 cases.

These exemptions allow you to keep a certain amount of your assets protected from your creditors. These exemptions can only protect certain types of property, such as a motor vehicle. Your attorney needs to analyze the available exemptions for the applicable state.

The way these exemptions work can differ depending on the type of bankruptcy under which you file. Here is a quick overview:

• Chapter 7 bankruptcy: In Chapter 7 bankruptcy , the court appoints a trustee to help sell off your assets so you can pay your creditors. However, the trustee cannot sell off property you have exempted. If, for example, you can exempt up to $7,000 value for your vehicle and your vehicle is only worth $5,000 as it is, you will be able to keep that vehicle.
• Chapter 13 bankruptcy: With Chapter 13 bankruptcy , you can keep all your property and reorganize your debts into a repayment plan. The amount you pay in this plan also depends on the amount of property you may exempt. However, your plan must provide that unsecured creditors receive at least as much as they would receive in a Chapter 7. So, exemptions will help keep your payments low by reducing the total amount owed.

Consider Both State and Federal Exemptions

The property you can exempt also depends on the state in which you live. Some states make it mandatory that you use state exemptions, while others allow you to choose whether you will use federal or state exemptions.

Federal exemptions are those that exist under federal bankruptcy code, meaning the amounts will not vary from state to state. These exemptions allow you to protect up to a certain value for each of your assets. The homestead exemption is one of the most common exemptions, which allows you to protect a certain amount of equity in your home.

Each state has its own set of exemptions that can either overrule or supplement the federal bankruptcy exemptions. Some states are much more generous than others when it comes to the exemptions they allow.

In Colorado, for example, there are several personal property exemptions available, including up to $3,000 in household goods, up to $2,000 in clothing, up to $2,500 in jewelry, up to $2,000 in books and family photos and up to $600 in fuel. Colorado also has a motor vehicle exemption of up to $7,500 ($12,500 for an elderly or disabled debtor/dependent of the debtor) and 75 percent exemptions on wages, among various other exemptions.

For more information and guidance on the exemptions available to you as you file for bankruptcy protection, meet with a skilled Denver bankruptcy attorney at Long & Long, P.C.