When debtors file Chapter 7 bankruptcy, there may be a small chance for the loss of property. Under Chapter 7, the bankruptcy court has the power to seize some of the debtor's property to use to pay creditors. Because of bankruptcy exemptions, however, most filers lose little to no property. Exemptions are offered to help filers hang on to as much property as possible. Rather than worry about what you might have to lose with a bankruptcy filing, learn a little about how the exemption system works. To better understand exemptions and a special type of exemption known as a wildcard exemption, in particular, read on.
What to Know About Bankruptcy Exemptions
Your state of residency dictates your bankruptcy exemptions. Each state has widely varying exemption rules and amounts. In some states, filers can choose between using state or federal exemptions, You cannot mix and match the exemptions, however; you must use either one or the other. Exemptions may either be a dollar amount or an item. For example, one state might allow all filers to keep their primary residence and one vehicle. Another state might give filers $30,000 in home equity as an exemption. When dealing with exemptions, always use the equity in a home and vehicle and not the actual value of items that have loans attached to them. When you file jointly as a married couple, you might get double exemptions. That might be a consideration if you are in danger of losing property even if your partner has no need to file. Both of you, however, will find that your credit is dinged for several years.
What to Know About Wildcard Exemptions
Not all states offer wildcard exemptions and the amounts can vary just as with other types of exemptions. A wildcard allows the filer to use the exemption for anything they like. It can be used for a home, a vehicle, or it can be spread out over several items. Some states allow filers to use a quasi-wildcard exemption if they don't own a home or don't need to use the homestead exemption. Some states have a wildcard exemption but any state that offers the option of using the federal exemptions also allows filers to use the federal wildcard exemption to cover any needs.
When filers have a choice of exemptions and have lots of property in play, things can get confusing. Make a list of your real estate, vehicles, and other property and talk to a bankruptcy lawyer about exemptions available in your location.
To learn more, contact a bankruptcy lawyer today.