If you’re going through financial distress, you may want to file for bankruptcy under Chapter 7 or Chapter 13. Either bankruptcy chapter allows you to have certain assets exempted from bankruptcy proceedings. If an asset is exempted, it will not be sold to your creditor to pay your debt. Different exemptions are specific to different types of property. Here are some instances. The homestead exemption excludes your main residence from being sold to pay off debts. The motor vehicle exemption, on the other hand, offers protection for a car. Meanwhile, the wildcard exemptions pertain to a certain amount of value applied toward any property. You may be able to shield some or all of an asset’s value with this exemption, based on the amount covered by the exemption and the worth of the asset.
What assets aren’t likely to be included in the exemptions? Assets that are considered luxuries, like a sports car, a second home, jewelry, designer items probably wouldn’t be exempted. If you have these types of assets, the answer to your financial problems may be to simply sell them to pay off your debts instead of filing for bankruptcy. When it comes to your pets, you technically cannot protect them with an exemption, but the bankruptcy trustee probably wouldn’t be interested in them unless they are high value and could fetch a decent amount of money when sold.
Exemptions Based on Bankruptcy Chapter
Chapter 7 – This is all about the liquidation of the debtor’s assets. When you file a bankruptcy petition under Chapter 7, the trustee takes your assets and sells them to pay your debts. Exempted assets are spared from being liquidated. In case the value of the exemption is higher than what the asset is worth, you can just keep the asset, but if the exemption is lower than the asset’s value, the trustee can sell it and then give you the rest of the proceeds after paying off your creditor.
Chapter 13 – This is all about reorganization. You basically come up with an acceptable repayment plan in order to reorganize your finances. Your assets aren’t sold off, but you pay back creditors to whom you owe non-priority unsecured debts in proportion to your non-exempt assets. Essentially, your planned monthly payments are reduced with these exemptions.
Washington has its own set of exemptions, but there are also federal bankruptcy exemptions. Washington allows filers to choose between state and federal exemptions, but not all states use this approach. Debtors should take note that, according to bankruptcy law, they’re not allowed to take some exemptions from the state set and other exemptions from the federal set. It’s either one entire set of exemptions or the other.
If you are taking advantage of state bankruptcy exemptions, you may be allowed to use federal non-bankruptcy exemptions to protect certain assets. However, you’re not allowed to use these exemptions if you chose to use the federal bankruptcy exemptions. This is something to consider when making your choice. The combination of state bankruptcy exemptions and federal non-bankruptcy exemptions may just offer the best bankruptcy protection on your assets.
To Determine Your Bankruptcy Options, Consult a Washington Bankruptcy Attorney Today!
If you want to file bankruptcy, but don’t know how to get the best outcome from the experience, a bankruptcy lawyer can evaluate your case and figure out which bankruptcy option best suits your circumstances. To get legal advice and guidance on bankruptcy filings, call us at Northwest Debt Relief Law Firm and speak with one of our experienced Washington bankruptcy attorneys.