Bankruptcy Exemptions in Delaware

For those who are in financial trouble, sometimes bankruptcy is the only solution.  And while that can be a difficult process to go through, there are protections put in place by federal and state statutes to allow debtors to save some or all or their property from liquidation, especially when they choose chapter 7 bankruptcy. 

In Delaware, the statutes require residents filing for chapter 7 to use only the state property exemptions.  However, it is important to know those limits before filing a bankruptcy petition.

How to Keep Your Car

State and federal exemptions differ in this area:

• Federal exemption – $3,225
• Delaware state exemption – $15,000 (as part of the necessary tools of the trade for employment)

While a vehicle can be exempt from liquidation, that doesn’t protect one that is security for a loan from being repossessed.  It is important for debtors to keep up their payments on that loan if they wish to keep their vehicle.

How to Keep Your Home

• Federal homestead exemption - $20,200
• Delaware state exemption – $50,000 for real property or a manufactured home that is a primary residence (this exemption is not subject to doubling)

In addition, if this primary residence is security for a mortgage, the debtor must continue to make their regular payments or face foreclosure by the lien holder.

Delaware allows exemptions for other forms of personal property:

• Total exemptions (besides retirement plans and principal residence) – up to $25,000 (subject to doubling)
• Clothing, jewelry, books, family pictures, piano, leased organs, sewing machines, church pew or any other seat in a public place of worship, burial plot
• College investment account – the greater of $5,000 for 1 year prior to filing or the average of the past 2 years’ contributions
• Principal and income from spendthrift trusts
• Tools of the trade – tools, implements, and fixtures – up to $75 in New Castle and Sussex counties, and up to $50 in Kent County
  • Vehicles and/or tools that are necessary for employment – up to $15,000 each
• Any other personal property – up to $500 for head of family

Filing Schedule C of a Bankruptcy Petition

Items to be claimed as exemptions must be listed in Schedule C and filed with the bankruptcy petition.  The information on Schedule C must include:

• A listing of each property exemption
• The Delaware statutes that apply to each claim
• The exemption value of each claim
• The current assessed value of each claim (not the market value)

Using a Lawyer to Your Benefit

There are many difficult decisions that go into filing a chapter 7 bankruptcy—decisions that could change the course of a person’s or family’s life.  Without solid legal and financial advice, it can be easy to make a mistake.  That is why it can be vital to consult a bankruptcy attorney to obtain both kinds of advice and avoid the mistakes that are so common, which can delay or even sabotage a bankruptcy petition.