Do I Have to Give Up All of My Assets in Bankruptcy?
In considering bankruptcy, the fear of losing all assets often holds people back from making this often-beneficial decision. For the court to reduce or eliminate debt, they will need to examine your assets and determine what you can keep and what you’ll have to give up. If you’re thinking about filing for Chapter 7 or Chapter 13 bankruptcy, you may be relieved to learn that many types of personal property, including your homestead, are applicable for exemption. Exempt assets are those you get to keep at the end of your bankruptcy case.
With the advice of a reliable bankruptcy attorney, you can get relief from bankruptcy while protecting as much of your assets as possible.
What is the difference between Chapter 7 and Chapter 13?
Chapter 7, or liquidation bankruptcy, eliminates all unsecured debts, including medical bills and credit card debt. To qualify for Chapter 7, you must have little or no assets. In order to pay for at least some of your debt, any non-exempt property you own will be sold by the Chapter 7 trustee. When you don’t have any non-exempt possession, creditors will receive nothing.
Chapter 13, or reorganization bankruptcy, is an option for those who make too much money and are ineligible to file for Chapter 7. Filing for Chapter 13 allows you to keep your property, including non-exempt assets, but you will have to pay back at least a portion of your debts through a repayment plan. The court will review your income, expenses, and types of debt when creating a repayment plan for you. Under this chapter, you will receive the discharge order as soon as your payment plan is completed. While the length of this payment plan varies by case, you will typically be responsible for making payments for three to five years.
The Homestead Exemption
When it comes to bankruptcy, Florida has a generous homestead exemption that keeps primary residence outside the reach of creditors. Whether you file for Chapter 7 or Chapter 13, you will be able to keep your home.
Some additional requirements include:
- Homeowners can exempt the full value of the home if the property is no larger than a half-acre inside a city or 160 acres elsewhere.
- There may be limits to the amount of the homestead exemption if have owned the property for less than 1,215 days.
- This exemption only applies to your primary residence. You cannot exempt vacation homes or other investment property.
Personal Property Exemptions
In Florida, you can protect personal property up to $1,000 or up to $4,000 if you don’t take advantage of the homestead exemption. For joint filers, this exemption is $8,000. This exemption is known as the “bankruptcy wildcard exemption,” and filers can choose the personal property they wish to exempt. Some examples of personal property that are exempt include health savings accounts, education savings, hurricane savings, tax refunds.
Items that are not exempt and might be taken by the trustee to pay the creditor include fine clothing, jewelry, or musical instruments. It is important to remember that you will always have the option to pay to keep these items.
Motor Vehicle Exemption
Bankruptcy filers in Florida can typically avoid losing the primary vehicle they drive. Debtors can exempt up to $1,000 in a car, and if you’re married and file for bankruptcy jointly, this amount is usually $2,000. If your car is worth less than the remaining balance, there is no equity to give your creditors, and you may be able to keep it if you are current on payments and intend to continue paying it.
However, if your car is worth more than you owe under Chapter 7, it can be liquidated. Fortunately, however, if you have over $1,000 in equity in your case, you may be able to cover the additional amount using the wildcard exemption as long as you do not use the homestead exemption. For example, if your vehicle is worth $3,000 and you own it free and clear, you can use your $1,000 automobile exemption and $2,000 of the wildcard exemption to keep the car.
In addition to these exceptions, many other types may or may not apply to you. To make an informed decision when filing, it is always a good idea to seek legal advice from an experienced bankruptcy lawyer.
Contact Us For a Free Bankruptcy Consultation
Before beginning your petition, having a clear understanding of your case, including assets you may end up surrendering, can help you protect as many of your assets as possible. Our bankruptcy law firm is here to help you find an affordable solution to your debt problems while safeguarding your property from creditors and the bankruptcy court. Call us at 561-658-1789 or reach us online to schedule a free case review with our bankruptcy attorney, Brian K. McMahon.