Chapter 7 bankruptcy exemptions

When you are filling for chapter 7 bankruptcy you are allowed to keep certain properties or assets. These are called exempt properties and are protect and described by Federal and State bankruptcy exemption laws. The rest of them are called non exempt properties and will be given to the bankruptcy trustee who will sold them in order to pay your creditors.

Each state has its own exemption law and on some of these you are allowed to choose between the federal exemption law and the state exemption law. Make sure you careful read these laws (and maybe get advice from a bankruptcy lawyer) before filling for Chapter 7. A misunderstanding or a wrong interpretation can change your life in a negative way.

In the case that all your properties are exempt (or subject to valid liens) the trustee will file a no asset note to the court. In this case there will be no distribution to unsecured creditors (most of chapter 7 are no asset cases).

In “Title 11 U.S.C. Section 522″ the following assets are classified as Chapter 7 bankruptcy exemptions:

1. real property or personal property not to exceed 18,450 usd in value is exempt( includes co-ops and mobile homes)

2. motor vehicles up to 2,950 usd are exempt.

3. items not to exceed $425 for any single item or 9,850 usd in aggregate value of the objects (includes: household furnishings, goods, appliances, books, animals, crops and even musical instruments)

4. pieces of jewelry that not exceed 1,225 usd.

5. occupational or trade tools that not exceed 1,850 usd.

6. alimony, child support payments needed for support are exempt.

7. health aids are exempt.

8. lost earnings payments, public assistance, social security, unemployment compensations, veterans’ benefits, wrongful death payments are all exempt.

9. personal injury compensation payments not to exceed $18,450.

Please note that couples who apply for a joint bankruptcy can double the sum of exemptions listed above.

With the bankruptcy laws from October 2005 the debtor must use the exemptions of the state in which he has lived for the last 2 years. If the person who fill for bankruptcy didn’t lived in any particular state for the 2 years he must use the laws of the state in which he lived for 180 days.

If these options are not valid the debtor will use Federal Chapter 7 bankruptcy exemptions.