Bankruptcy exemptions permit you to be able to keep some of your property and assets safe from being liquidated. Exemptions will either protect the entire value of the asset or up to a certain monetary amount. If an asset qualifies for an exemption, it will remain untouched and unaffected by your bankruptcy.
In a Chapter 7 bankruptcy, any property that can be exempted will not have to be liquidated in order to pay off debts to creditors. Bankruptcy exemptions are able to help you protect your assets in this case. The bankruptcy trustee assesses the value of your property to determine whether it will be something that can satisfy the debts that you owe. If you surrender a property to pay your creditors and you have loans securing your property, the trustee will be responsible for paying the amount of the loan to the creditor.
In a Chapter 13 bankruptcy, the trustee will not sell any assets. You are responsible for paying the portion of the property you are unable to exempt to your creditors as part of the payment plan.
How much property you’re able to hold on to depends on the value, and the state that you live in. Most states also have a wildcard exemption, which can be used to exempt any piece of property.
Generally in Ohio, the following are examples of bankruptcy exemptions:
- Real Estate – This “Homestead Exemption” includes the protection of up to $136,925 of equity in the home. If you file for joint bankruptcy with your spouse, you can double the exemption amount.
- Automobiles – The protection of up to $3,775 in one motor vehicle.
- Cash – $475 in money on hand or in the bank.
- All IRAs, 401ks, and other retirement plans.
- Personal injury recoveries; wrongful death recoveries; certain tax refunds.
It might be wise to reorganize your assets to take advantage of as many exemptions as possible. For example, any extra finances that are available could be spent on exemptions prior to filing for bankruptcy. It is important to be cautious of doing this – excessive exemption planning may be construed as fraud by the court.