Bankruptcy is a powerful way for a debtor to protect themselves from creditors that they cannot pay. The harassment can be relieved when those debts are erased under Chapter 7 bankruptcy laws. However, there is, of course, a downside for a debtor. They may have their property liquidated to satisfy some of that debt before the creditors disappear. That is where federal and state property exemption laws come in. They protect some, or in some cases all, of a debtor’s property during the bankruptcy process. In Wisconsin, filers have the option of choosing to claim federal exemptions or state exemptions, but they cannot combine the two. It is important, therefore, to understand which hold the greatest benefit for every individual.
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- Wisconsin state exemption – $1,200 in aggregate value, plus unused portion of household furnishings exemption – up to $4,000
That vehicle may also require the owner to continue to make loan payments if that loan is secured by the vehicle. If payments are missed or the owner defaults, the lien holder may have the right to repossess the vehicle.
How to Keep Your Home
- Federal homestead exemption - $20,200
- Wisconsin state exemption – $75,000, for real property you occupy or intend to occupy (may be doubled for couples filing jointly)
- Proceeds of sales are exempt for 2 years if you intend to purchase another residence
A debtor’s property may also be subject to foreclosure if it is security for a mortgage. Unless the property owner continues to make regular payments, they may not be able to protect their home.
Wisconsin allows exemptions for other forms of personal property:
- Consumer goods – up to $12,000 (spouses filing jointly may double)
- Household furnishings – up to $5,000
- Personal injury recoveries – up to $50,000
- Tools of the trade – up to $12,000
Filing Schedule C of a Bankruptcy Petition
All of these exemptions, whether the debtor chooses state or federal exemptions, must be listed on Schedule C and attached to the bankruptcy petition. The listing must include the following details:
- The property claimed
- The state or federal statutes substantiating those claims
- The property exemption value for each claim
- Each claim’s current assessed value (not the market value)
Always Talk to a Lawyer First
If the entire bankruptcy process seems daunting, and it appears that you will be unable to find a way to properly file for the appropriate exemptions, you should consult with a bankruptcy lawyer. They can explain every element of the procedure and help you understand what will work for you, how you can use this process to benefit your financial future, and how you can meet the legal requirements. Call a bankruptcy attorney today to learn more.
