Understanding Bankruptcy Exemptions
When people envision bankruptcy, they often think of all of their belongings being hauled off by their creditors. This is not necessarily the case, and that is due to bankruptcy exemptions. Bankruptcy exemptions help you to protect certain property from bankruptcy proceedings. Bankruptcy law in Florida can protect you in certain circumstances, which we will discuss below.
Exemptions are an Important Part of Bankruptcy Law in Florida
Exemptions can be defined as a specific piece of property, or as a dollar amount representing that property. Exemptions can be applied differently, depending on which type of bankruptcy you are filing.
With Chapter 7, an exemption defines a piece of property that cannot be taken during bankruptcy. In Chapter 7, you are basically liquidating your existing property to satisfy your debt. Your exempt property cannot be seized and becomes the exception. These exemption levels are set by the state. So, if your state allows a $4,000 auto exemption and you have a car worth $2,500, you can keep the car.
If you are filing for Chapter 13, exemptions are used to help determine your payment plan, and could actually mean the difference between qualifying for bankruptcy altogether. When you file for Chapter 13, you are negotiating a payment plan that allows you to keep your assets. The amount you are required to pay is determined in part by your exemptions. The right exemptions, used properly, can help you keep your payments lower.
As previously mentioned, each state has its own set of exemption laws. These laws determine what qualifies as an exemption. However, federal law also has exemptions for bankruptcy. These apply to all bankruptcies on a federal level.
With federal exemptions, you can protect a certain amount of equity for your personal residence. This is called the homestead exemption. However, this exemption does not apply to investment properties, only to your primary residence.
On a federal level, you also have partial protection for personal property. This includes your motor vehicle, jewelry, household goods and furnishings, tools of your trade, health aides and loans.
Any support or benefit you provide or receive that are necessary to your survival are also protected. This includes spousal support and child support.
If you are filing for bankruptcy, your exemptions can help protect you and ensure that you are given a realistic view of your financial future. To learn more about local exemptions for your state, check the bankruptcy law in Florida.
Source: Federal Exemptions