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What Property Can You Keep in Chapter 7 Bankruptcy

For many people seeking debt relief, Chapter 7 bankruptcy is the best option. However, many people looking to file for bankruptcy are concerned about losing their homes, car, or other personal assets. To help you better understand nonexempt and exempt property, Robert Stiberman, an experienced bankruptcy attorney in Florida, is breaking down what you can keep in a Chapter 7 bankruptcy.

What Is Chapter 7 Bankruptcy?

First, it’s important to have a clear understanding of how Chapter 7 bankruptcy works. This is a liquidation bankruptcy in which your eligible debts are totaled, then a bankruptcy trustee assigned by the court gathers your valuable, personal property, and sells it to pay off your unsecured creditors. After your nonexempt property is sold, any remaining eligible debt is discharged, absolving you from any additional debt collection or payments, including civil judgment and wage garnishment.

Debts That Can Be Discharged in Your Bankruptcy Case

  • Credit card debts
  • Payday loans
  • Personal loans
  • Medical bills

Ineligible Debts

  • Debts from a secured creditor, including mortgages or car loans. These will be foreclosed or repossessed by the lender if you fall behind on payments.
  • Most student loans
  • Most tax debt
  • Legal debt, including fines or payments owed to personal injury cases
  • Domestic debt, including back child support or alimony

Understanding Bankruptcy Exemptions

When you file for Chapter 7 bankruptcy, the valuables you own are added to your bankruptcy estate and considered nonexempt property, meaning they can be sold to pay off unsecured creditors. However, bankruptcy exemptions are available to protect your property. While federal bankruptcy exemptions do exist, Florida is an opt-out state, and this means that only the state exemptions they offer are allowed to be used in your bankruptcy case.

Exempt Property

Before filing bankruptcy exemptions, these are exempt assets that can’t be collected by a bankruptcy trustee:

  • Retirement accounts, including a 401k or IRA
  • Reasonably necessary clothing
  • Reasonably necessary household goods
  • Appliances
  • Pension
  • “Tools of the trade” meaning items necessary for your job
  • Veteran benefits
  • Personal injury benefits
  • Disability benefits
  • Health aids
  • Social Security benefits

Nonexempt Property

These items, belongings, and property are part of your bankruptcy estate and can be collected unless an exemption is used to protect them:

  • Valuable collections, such as stamps or coins
  • Valuable art
  • Cash, savings accounts, or an investment portfolio
  • Secondary vehicle
  • Secondary home
  • Boat or recreational vehicle
  • Expensive musical instruments such as a piano or guitar
  • Home equity

Florida Residency Requirement

Before we dive into state exemptions you may be eligible for, you need to be aware that Florida does have a strict residency requirement in its bankruptcy code. To be eligible, you must live in Florida for a minimum of 730 days or two full years. Otherwise, you must use the state exemptions from where you lived for six months prior to moving to Florida. For example, if your Chapter 7 bankruptcy filing is dated for May 2022, and you moved to Florida in October of 2021, you would need to use the state’s exemptions from where you moved from, or you may be eligible for federal exemptions.

Florida Bankruptcy Exemptions

Now that you understand what Chapter 7 bankruptcy is, exempt and non-exempt property, and you’ve established that you meet residency requirements in accordance with state law, let’s look at the individual bankruptcy exemptions available to you.

Homestead Exemption

Filing for the homestead exemption allows you to keep your primary residence and all the equity you have in your home, regardless of how much it’s worth. The state’s exemption laws regarding this are:

  • You must own the property for 1215 days (just under 3 1/2 years);
  • Property can’t exceed 1/2 acre if you live in the city or 160 acres if you live in a more rural area.

It’s important to note that the homestead exemption does not protect you from foreclosure. If you are behind on your mortgage payments, and you file for bankruptcy, the proceedings will pause. However, the foreclosure will start up after your case has been finalized.

Wildcard Exemption

The wildcard exemption offers $1,000 in exempt personal property. This could include anything within your bankruptcy estates, such as family heirlooms, video game consoles, valuable household goods, or any other assets of value. However, if you are not using the homestead exemption, the exemption amount increases to $4,000.

Motor Vehicle Exemption

If you have more than $1,000 in equity in your vehicle, it can be sold to pay your debts. However, you can use the wildcard exemption to increase the protected equity to $4,000. For example, if your car has an estimated value of $8,000 and you owe $4,000, you have $4,000 in vehicle equity. Using the wildcard option means your car is protected from being sold.

Again, it’s important to note that if you are behind on your payments, filing for Chapter 7 bankruptcy does not protect you from having your vehicle repossessed. It pauses the process, but after your bankruptcy case is finalized, it can be repossessed.

Schedule a Free Bankruptcy Evaluation Today

If you are considering filing for Chapter 7 bankruptcy to achieve debt relief, schedule a free consultation with a bankruptcy lawyer today. We understand that exemption laws and bankruptcy paperwork can be overwhelming to understand, and we will help you navigate the process, understand exemption rules, stand up for you in court, and fight to protect your bankruptcy estate. To get started, call us at 954-807-1562 or fill out the form below.

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