Chapter 7 Exemptions
An important aspect of Chapter 7 Bankruptcy, any other bankruptcy under the Code, is what property is exempt. Exempt property is property that a person filing bankruptcy can keep and is safe from liquidation by the Chapter 7 Trustee. When a person possesses nonexempt property, the Chapter 7 Trustee will take that property and distribute the proceeds to the unsecured creditors. Not only does Chapter 7 protect the Debtor, but the Bankruptcy Code is designed to protect the creditors if there is nonexempt property that can be liquidated to pay back part of their debt.
There are two forms for chapter 7 bankruptcy exemptions under the Code: State and Federal.
Some states allow a Debtor to use either form of exemption. Texas is one of those states. However, many states have “opted out” of the Federal Exemptions and only allow a Debtor to use State exemptions. Therefore, because all states are different, it is impossible to discuss what property is exempt and nonexempt. When a person meets with a bankruptcy attorney, he or she needs to let the attorney know if they have lived in another state within the past two years because that is important when determining which exemptions that person can use.
Usually a Debtor can Exempt
1. Equity in a Propert Up To A Certain Amount in Their Homestead
4. Household Goods
9. Life Insurance
10. Retirement Accounts
11. Personal Injury Recovery Depending on the amount
Examples of What Might Be Nonexempt
1. Property are Second Homes
2. Excess Vehicles
4. Large Financial Accounts
7. Business Assets
9. Valuable Jewelry
10. Livestock & Horses
11. Personal Injury Recoveries Beyond the Allowed Amount
The items listed above for exempt and nonexempt property all have exceptions and should be reviewed thoroughly by a bankruptcy attorney.