Anyone considering personal bankruptcy is concerned about bankruptcy limitations and what property they can keep or lose. Even if you file for Chapter 7 protection, where you erase your debts and the trustee sells your property to give the money to creditors, you won’t lose everything. If you file for Chapter 13, you can keep everything, but you must agree to a repayment plan with your creditors and keep up with your payments.
Chapter 7 Exemptions
Under Chapter 7, you can keep certain property up to a dollar limit. These are exemptions. For example, federal bankruptcy law lets you exempt more than $9,800 worth of furniture that your bankruptcy trustee can’t sell to pay your creditors. You can keep $18,450 of the equity in your home. So, if your mortgage is $150,000 and your home is worth $140,000, you won’t lose it because $18,450 is more than the $10,000 difference. Exemptions also cover equity in your automobile. You must keep up with the mortgage payments or car payments, however, or your lender can demand its property back.
Federal and State Bankruptcy Exemptions
Both federal and state bankruptcy laws include lists of exempt property under Chapter 7. Some states’ exemptions are more favorable than the federal rules. In other states, they aren’t. Some states don’t give you an option—you’re stuck with your state’s exemptions. Others let you choose between federal and state. This can be a difficult decision because you have to choose the whole group of exemptions. You can’t mix and match.
Federal law also lists “excluded” property, and this does not usually have a dollar limit. For example, your trustee can’t sell your retirement funds, annuities, and certain trust funds, no matter how much they’re worth.
You Can Buy Back Your Property
Your bankruptcy trustee doesn’t care who purchases your non-exempt or non-excluded property, as long as the trustee receives its fair value. You can usually buy back any of your property yourself from the trustee if you have the money.
You Can Reaffirm Some Loans
You can also elect to keep a loan if you don’t want to lose the collateral. For example, if you include your car loan in your bankruptcy as one of your debts, your car is collateral for that loan and the lender has the right to repossess it. However, the lender will probably offer to reaffirm the debt instead, which means you’re starting over with a whole new loan on your vehicle, but you do get to keep it
A Personal Bankruptcy Lawyer Can Help
The laws surrounding exemptions and exclusions in personal bankruptcy are complicated and the facts of each case are unique. If you’re having trouble repaying your debts in the state of Arizona, one of the qualified and experienced Phoenix bankruptcy attorneys may be able to help. We handle both Chapter 7 and Chapter 13 bankruptcy filings and can answer any and all questions you have about this difficult financial decision. Contact us today to learn more!