How To Learn More About Bankruptcy Exemptions?

Answer 1

Consumers who are contemplating bankruptcy may be worried that one of the effects of the bankruptcy order would be to divest them of all of their assets. This is not the case, however, as state and federal law has specified that certain assets are to be seen as exempt from the bankruptcy process.

There are basically two different types of exemptions - and here exemption means that the assets cannot be taken by the debtor’s bankruptcy trustee and sold to raise money to pay off creditors - and these are complete exemptions and partial exemptions. Complete exemption is where the asset would not form part of the bankruptcy at all - family portraits in Alabama, for instance, are completely exempt from bankruptcy proceedings - and partial exemption is where an asset is protected up to a certain value. An example of partial exemption would be the state of Vermont’s homestead exemption law where the first $75,000 of the value of a debtor’s house would be exempt from the bankruptcy process. In most states, furthermore, there is also a third type of exemption: the wild card, and this constitutes a certain value that can be used to protect a portion - or all - of the value of almost any asset.

Each state has its own specific laws, which set out exactly what items are exempt in that particular state. Although it may have, in the past, been difficult to obtain information about a particular state’s exemptions, these days it is exceptionally easy to do so, and a simple Google search for name-of-state bankruptcy exemptions will pull up hundreds of helpful sites. Further information about state-specific exemptions can also be obtained from bankruptcy lawyers, and, although a consumer’s instinct may be to protect his assets by not listing them on his bankruptcy schedule, this isn’t the way to go. Assets should, instead, be listed in full, and all allowable exemptions should be claimed to the full extent of the law.

The present bankruptcy process is not about taking away a debtor’s assets but rather about helping him clear his past debts while providing him with a sound basis for the future.