Assets and Bankruptcy

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There is a lot of confusion about assets and bankruptcy. Believe it or not most people that choose to file for bankruptcy protection keep all of their stuff. They even keep their house and cars. California has generous exemptions that protect the stuff you own and allow you to keep it. If filing bankruptcy left you barefoot and without a car how can you start over?

Houses and Bankruptcy

If you own a home and are current on the payments you can file a Chapter 7 bankruptcy case and get rid of all your unsecured debts like credit cards, personal loans or medical debts. This is assuming you qualify to file a Chapter 7 case based upon your income, expenses and assets. What if your house has some equity? This means the house is worth more than what you owe. California allows you to protect up to $75,000 in equity if singe and $100,000 if married. If you are disabled or older than 65 years old you can keep $175,000 of the equity. You also need to include the cost of sale of the house and if there are any capital gains taxes you will have to pay when selling the house. So if the amount of your first mortgage, plus the applicable exemption, plus the cost of sale and plus any capital gains tax is the same or more than your house is worth there is no value to the bankruptcy estate or your creditors. You keep the house. Make sure you speak with an experienced bankruptcy attorney in your area. Especially since home values are increasing in most California communities. If you are behind on your mortgage payments then you need to take a look at filing a Chapter 13 bankruptcy case to save your home.

Cars and Bankruptcy

If your car or cars are paid in full whether we can protect the vehicles depends upon their value. California just increased the vehicle exemption amount to $5,100 to be applied to one car. California also has the wildcard exemption which totals $26,425. So in theory you could have two or more vehicles worth a total of $31,525 and still keep them. Keep in mind if you are still making payments you need to deduct the amount you still owe on the loan from the value to figure out how much your vehicle is worth. If you do have payments still you just need to keep them current. If you are behind on your car payments or want to lower your monthly car payment you should look into filing a Chapter 13 bankruptcy case. Speak with a bankruptcy lawyer in your area about how Chapter 13 can lower your vehicle loan amount and percentage rate.

Your Other Stuff

For the most part all of your used household goods are not worth much. Once you purchase most things the value decreases rapidly. The exception is jewelry and other collectibles. You may need to have your jewelry appraised to make sure it can be protected. The jewelry exemption under the California 703 exemptions is $1,525 and under the 704 exemptions $7,625.