Bankruptcy Courts Allow You to Keep More Property in 2010

Starting April 1, 2010, the Bankruptcy Courts have increased what bankruptcy filers can keep by increasing the exemptions claims.

Contrary to popular belief, filing for bankruptcy will not mean losing all of your personal belongings.  Bankruptcy filers, called debtors, can "exempt" belongings from creditors.  The amount varies from State to State (or a standard Federal exemption amount may be used) and it is quite generous in California compared to other States.

How Do They Work?

In the bankruptcy petition, the debtors list the items they wish to exempt.  As long as the amount is below the exemption limit, the debtors should keep that asset.  It is important to list all the claimed exemptions because omitting one can result in loss of the asset.  It would suck to lose your car because it was not listed in the exemption claims.

What are These Exemptions and How Much are They?

There are numerous exemptions and the amounts vary for each State.  In California, common 703 exemptions are the Motor Vehicle (raised from $3,300 to $3,525), Jewelry (raised from $1,350 to $1,425), Household Goods and Furnishing – each item not to exceed $550 (up from $525), and life insurance (raised from $11,075 to $11,800).  Therefore, debtors may be able to keep over $15,000 of personal assets in the bankruptcy.

Less common ones are the Tools of Trade (raised from $2,075 to $2,200) and Personal Injury Payments (raised from $20,725 to $22,075).  These exemptions allow the debtors to keep an additional $24,000 of assets.

That’s Not All - Exemptions Gone Wild!

California has a generous "wildcard" exemption which was raised from $21,285 to $23,250.  This exemption is allowed to exempt almost any asset, such a car worth more than the allowed Motor Vehicle exemption or a small savings account.  So debtors may be able to exempt over $37,000 of assets in a common bankruptcy.  Not a bad trade for wiping out all of your debts. (as a note, the wildcard exemption may not be available if a homestead exemption is claimed on real property with equity)

How Does this Help Me?

The key is that bankruptcy is not the end of the world.  Debtors can keep their car, furniture, clothes, jewelry, life insurance, and other assets even though their debts are wiped out.  These exemptions are available to everybody.  If you want to see how it applies to your situation, contact us for a free consultation.

Eddy Hsu is an attorney experienced in the areas of Bankruptcy and Family Law.  He is admitted to practice in California and the Northern District of California Bankruptcy Court. He may be reached at 415-230-5388, and via email at eddyhsu@ehsulaw.com. The above article is informational only and not legal advice for your specific situation.  Always consult directly with an attorney to obtain legal advice.