Many debtors worry that that if they file for bankruptcy they will lose all their assets. That is not the case. Many of your assets and income can be protected. An easy way to save your property is if it is listed as “exempt.” Exempt means creditors can’t touch it. This applies for both chapter 7 and chapter 13 bankruptcy.
- In chapter 7, the Bankruptcy court is looking to sell off all your assets to pay creditors. You can save some of your assets using your exemptions.
- In Chapter 13, you have to prepare a plan. You don’t have to include your exempt property in the plan.
Residents of Texas can choose from one of two sets of exemptions when they file for bankruptcy. They can select the Texas set of exemptions. Or they can also select the US Bankruptcy list of exemptions. The US Bankruptcy list is known as the “federal” exemptions. Generally, you have to choose either the Texas exemptions or the federal exemptions.
An Example: First, for all property, you figure the value of your property and the amount that is owed. Let’s start with your car.
- The easiest case is where you don’t owe any money on the car. If the value of the car is less than the value of your exemption, then you can keep the car. For example, a car worth $2,500 can be saved, using the federal exemption, because the federal exemption for cars is more than $2,500.
- A more typical case is where you owe money on the car. For example, your car is worth $10,000 but you owe $12,500. Your equity is the difference – $2,500. As long as you keep up the payments for the amount you owe, you will be able to keep the car. The car can’t be used to pay other creditors.
Federal Exemptions. The amount of federal exemptions is adjusted for inflation.
- Protecting Your Home. This exemption protects your residence – where you actually live. It’s not for investments. The federal exemption allows you to save equity up to $22,975.
- Protecting Your Personal Property.
- Protecting Your Car. You can protect your car up to $3,675 in equity.
- Protecting Jewelry. You can save up to $1,550 in your jewelry
- Your home furnishings, household goods and appliances, your clothing, musical instruments, books, crops and animals. You can save up to $12,250 in total value. Any item worth more than $575 may not be able to be saved.
- Protecting Your Tools. Many people need equipment and property to make a living. You can save up to $2,300 in tools of your trade. This includes books.
- Health aids – for example, hearing aids
- Life insurance policies. If you can take a loan against your policy, you can protect up to $12, 250. You can also protect life insurance policies that haven’t matured. You can’t protect credit life insurance.
- Personal Injury Awards. You may also protect some money you got in an accident case. You can save
- Up to $22,975 except for pain and suffering or pecuniary loss
- Future earnings – if they’re needed for support
- A wrongful death award (when someone dies) if you were a dependent of that person. You can only exempt the money if it is for your support.
- Money for being the victim of a crime
- Retirement benefits. Most retirement benefits such as IRAs and pensions are protected. There may be caps on the amount you can protect.
- Support Benefits
- Alimony and child support – generally.
- Life insurance payments – but only for your support
- Social Security benefits
- Unemployment compensation
- Veteran’s benefits
- Public Assistance benefits
- Disability/Illness benefits
- The Wild Card. Federal bankruptcy also has something called a wildcard exemption. It applies to any of your property. It’s basically a $1,225 bonus. You can also use $11,500 of any part of your home exemption you have left over for the other listed types of exempt property
Texas Exemptions
Texas has some of the same exemptions as the federal exemptions – though for different amounts. It has some additional benefits that are unique to Texas like Texas state college/university employee benefits. Homes are exempted according to their size. Texas Personal property exemptions include such items as firearms. They also include saddles, blankets and bridles for donkeys, horses and mules. Your lawyer can explain the differences between Texas and federal exemptions. He or she can tell you which benefits work right for you.
We invite you to contact Warren & Migliaccio at 888-584-9614 to schedule a confidential consultation with one of our attorneys to discuss your child support matters.