What Can I Keep If I File Bankruptcy?

You probably don’t have a car-furniture combination like the one in the picture.

But, you probably have a car or cars or vehicles of some kind, and, most likely, some furniture.

And there are lots of bankruptcy myths circulating about what happens to your stuff if you file Chapter 7 or Chapter 13.

Chapter 13 bankruptcy is easy, you keep everything.

It is a payment plan, you make payments to the Chapter 13 trustee, she keeps a percentage to run the office, and pays the creditors according to your plan.

Chapter 7 is different.

You are allowed to exempt property based on the laws of your state, even though bankruptcy law is federal.

In Michigan, debtors, those who file bankruptcy, have the choice of the state of Michigan exemptions, or the federal exemptions.

The federal are generally more liberal.

There are numerous categories of exemption for different types of property, and what we call the “floating” exemption, up to $11, 975 of exemption if it is NOT used for your home.

The federal amounts are periodically adjusted for inflation.

Federal exemptions also provide for $3,450 in a vehicle.

Exemptions apply to equity in property, the difference between what it is worth, and what is owed on it.

So, your car could be worth $11,000, and you owe $8,000 on it, so there is $3,000 of equity, all of which can be exempted under the federal exemptions.

You still have to pay for the car to keep it, exemptions do not trump liens on secured items.

There is also $1,450 available to exempt jewelry, $2,175 for tools of the trade, and $11,525 for household goods and furnishings.

Most people can keep all of what they own after filing Chapter 7.

The Michigan state exemptions have different amounts for these types of property.

This is one of the more complex areas of bankruptcy law, do not try this at home, consult an experienced professional.

What Can I Keep If I File Bankruptcy?

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2 Responses to What Can I Keep If I File Bankruptcy?

  1. If you are anything like me then you will keep everything. Don’t be scared – most people keep most of their stuff. Talk with a bankruptcy attorney about what you can keep before making the decision to file.

    Good luck to all that need it,

    ep