Is Property Protected From Bankruptcy?

Many people believe that when they file for bankruptcy, particularly Chapter 7, they will lose all their property. This is not necessarily the case. Chapter 7 bankruptcy regulations set down exemptions to property that can be liquidated in such a proceeding. In a Chapter 13 bankruptcy filing, all of the property is protected.

Exemptions for property liquidation generally vary by state. Here are some facts regarding Chapter 7 bankruptcy property exemptions:

- In 34 states, debtors must follow state property exemption laws rather than federal, while debtors in the remaining 16 have a choice of whether to follow state or federal laws when they file for bankruptcy. Some of the federal exemptions have become more stringent since the passage of the Bankruptcy Abuse and Consumer Protection Act of 2005, (BACPA.)

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- There are federal and state property exemptions for your house and automobile. While there are minimum federal standards, states generally offer the debtor more flexibility.

- The BACPA limits your home exemption to $136,875 if you bought your home during the 1215-day period prior to filing for bankruptcy. Exceptions to this rule include situations in which you upgrade to a more expensive home and transfer the equity from your old home to your new one.

- Household goods and furnishings are also exempt to a certain point. The federal amount is $10,775 or $525 per item.

- Retirement funds are also included in the property exemption for Chapter 7 bankruptcy.

Bankruptcy property exemptions are a complicated area of bankruptcy law. Your bankruptcy attorney will be able to determine which options are best for you.

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