In a chapter 7 case, you can keep all property which the law says is ”exempt” from the claims of creditors.
Federal exemptions permit you to retain as “exempt” up to $23,675 of equity in your residence and up to $3,675 in value in your car. If you don’t own real estate, you are allowed a $12,850 “wildcard” exemption that can be used on anything. In addition, you may keep up to $12,625 in personal property such as furniture and all your necessary clothing, books and family pictures. You may also keep up to $2,375 in any implements, professional books or tools of the trade, as well as all professionally prescribed health aids for you or your family. You may keep most retirement accounts (TSP, IRA, 401k, Roth IRA, 403B, Deferred compensation, Retirement annuities). Exemptions under the Federal exemptions are doubled for joint filings. Additional exemptions are available and the amounts of these exemptions may change from time to time. However, to avail yourself of these “exemptions”, you must properly request them in your bankruptcy case.
There are other exemptions that may apply. You should discuss with your attorney any assets you believe are not exempt. For the vast majority of chapter 7 cases, there are no non-exempt assets.
In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement. You also only need to look at the equity of your property. This means that you count your exemptions against the full value of the property minus any money that you owe on mortgages or liens. For example, if you own a $500,000 house with a $400,000 mortgage, you count your exemptions against the $100,000 which is your equity if you sell it. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not effect the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind or do not make future payments. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.
