Chapter 7 Bankruptcy Exemptions
Qualified Exemptions May Protect Your Property When Filing Bankruptcy
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Chapter 7 bankruptcy cases may eliminate debts through "liquidation"—the process by which the debtor's possessions, assets or sources of income are sold by the bankruptcy court to pay off creditors. Bankruptcy law allows some possessions to be exempt, or protected from liquidation.
While the bankruptcy trustee in a Chapter 7 case can sell some of the debtor's assets, most filers have no non-exempts assets, meaning there is no sale of property.
Exempt assets, which are possessions protected from being sold in Chapter 7 bankruptcy cases, vary from state to state, but typically include the filer's:
- primary residence
- tools
- work equipment
- vehicle
- certain items of personal property
- pension or public benefits
- other various categories of property
In some jurisdictions, the bankruptcy filer can choose between state and federal exemptions. A local bankruptcy attorney can explain the exemptions in your state, and how they compare to federal exemptions.
Qualifying for Chapter 7 Bankruptcy—What To Know
Filing Chapter 7 bankruptcy generally requires "passing" the Chapter 7 bankruptcy means test. The means test is a multi-step analysis:
- First, the prospective Chapter 7 filer's income is compared to the state median income (based on family size).
- If income is below the median income, the test is "passed" and the petitioner can generally go ahead with Chapter 7 bankruptcy.
- If not, the test becomes a bit more complex. Disposable income is calculated to determine whether or not the potential filer can afford to make payment toward outstanding debts each month.
- The vast majority of people filing for Chapter 7 bankruptcy DO "pass" the means test, and for those who don't, Chapter 13 bankruptcy may be an option. A local bankruptcy lawyer can walk you through the means test and explain your options.
Satisfying Chapter 7 Bankruptcy Requirements
Everyone who files for Chapter 7 bankruptcy or Chapter 13 bankruptcy is required to receive a Credit Counseling Briefing from an approved credit counseling agency before filing. And, in order to get a discharge, the petitioner must complete a Debtor Education Course after filing bankruptcy.
Examine Your Exemptions with a Personal Bankruptcy Attorney
Knowing your rights under U.S. bankruptcy can help you regain financial independence and silence your credits—often without having to compromise your home, car or other possessions.
Take the next step—connect with a local bankruptcy attorney to learn more about bankruptcy exemptions in your area.
To speak with a local personal bankruptcy attorney today who can evaluate your case, simply fill out the free case evaluation form below or call 877-833-2410 and connect with a lawyer near you.