How to Keep Property When Chapter 7 Exemptions are Used Up

Proceedings under Chapter 7 in Bankruptcy call for a liquidation of the debtors assets.  However, there are assets that are exempt from liquidation.  The exemptions that are available to debtors depending on where they live and whether their state has opted out of the exemptions available in the federal statute or if they provide exemptions in addition to those in the bankruptcy law.

Options to Keep Your Property

One way to keep property under Chapter 7 is to make sure that you have not over valued property when listing exemptions. 

• For instance, your household goods should be valued at a distressed sale value.
• Make sure you have used any state exemptions that may be available
• Property that can be classified as tools of your trade are usually exemptible up to a certain value.   
• If your state allows federal exemptions there is a wild card exemption under Section 522 that allows a debtor to exempt property that has not already been exempted under other sections of the bankruptcy code.

Is Your Property worth Liquidating

Another way that you  may be able to keep property when Chapter 7 exemptions are used up is dependent upon the Bankruptcy trustee.  Some property may be too expensive to liquidate  which may cause the trustee to abandon it.  For example, if your state exemptions allow you to keep a car worth $3500 but the car is worth $4500, the $1000 difference in value may be reduced to less the $500 once the expenses of the selling it are deducted.  Five hundred dollars to be divided between 12 creditors is not worth the trustee’s time to administer.   If the trustee abandons the property to the debtor the debtor keeps property worth more than the exemption available.

Exemptions in a Joint Bankruptcy Case

 If you are married and you file a joint petition in bankruptcy the amount of your exemptions are doubled.  Do not forget this when exempting property  it can increase your exemptions and allow you to protect property in the bankruptcy estate.

Talk to a Bankruptcy Attorney

You should seek competent legal counsel if you are filing bankruptcy.  A good lawyer will protect your interests and help you reach your financial goals as well as knowing the ins and outs of protecting assets in a chapter 7 or other bankruptcy filing.