What things do I get to keep if I file bankruptcy under chapter 7?

There are many misconceptions about the types of things you can keep in bankruptcy. Most individuals often assume Chapter 7 bankruptcy means you can no longer keep your home, car, or other property. A review of the exemption law reveals that is simply not true.

Debtors can choose between two exemption statutes when filing (Section 703 or 704). As I discussed earlier in a post on different exemptions for homeowners, there are certain value limitations under 704 when a debtor owns real estate with value. Debtors who own homes with significant equity (greater than $50k) may have trouble keeping their home or the equity in it when filing bankruptcy . However, because many homeowners have lost significant home equity due to the crash in real estate and the recession, most people do not have this “problem” when filing under Chapter 7.

As a result of having no equity in the home, most debtors should choose the exemptions under Section 703. Section 703 has standard exemption amounts for things such as a primary automobile, household property, furniture, and other personal goods. However, the most desirable aspect of this section is a generous wildcard that allows you to exempt any property up to $17,425 in value that is not already exempted as a burial plot or residence. Thus, a debtor with a car or other thing with significant equity can exempt any excess equity not covered by the standard exemptions through this wildcard.

Let me give an example. The standard exemption for an automobile is $2500. If a debtor has roughly $10,000 in equity in their automobile, they may exempt the excess $7500 by deducting that amount from their wild card allowance. Further, the client may also exempt other property until the exempted amount totals $17,425.

There are several other rules and categories for most exemptions. Give our office a call to discuss whether your property is exempted and what your options would be if you decided to file bankruptcy under chapter 7. You can also get an instant analysis of your options by filing out our online bankruptcy evaluation.

This post was written by Benjamin Yrungaray

Benjamin Yrungaray handles bankruptcy and loan modification cases at First Source Law. He is a member of the state bars of California (#256224), Pennsylvania (#208558), and New Jersey. He is also admitted in the Central District Court of California, Southern District of California, and New Jersey District Court.