In this prior post, we discussed Exemptions in Bankruptcy and why very few people actually lose property to the Bankruptcy Trustee (mainly in Chapter 7 cases). The primary reasons that people filing for Bankruptcy do not lose property is because they either do not have property that could be sold for a significant amount, or they carefully and properly plan before filing and submit the appropriate exemptions in their Schedules. We could not discuss all of the exemptions in every state, but we can provide most of the exemptions available to people who file for Bankruptcy in Georgia. Here they are:
- Homestead. If you own a home, you can exempt up to $21,500 in equity, or $43,000 for married co-owners. Please see this post in which we discussed that it really takes significantly more equity for a Trustee to be interested in selling your house.
- Vehicles. Up to $5,000 per person (not per vehicle) in individual or joint cases. Although that means there is $10,000 available in joint cases, each individual can only exempt the equity in a vehicle they own or that is owned jointly. A filing spouse cannot use their $5,000 to exempt a vehicle owned solely by the other spouse. This same analysis applies to most exemptions. Although we often say the amounts are doubled in joint cases, in reality each person can only use their own exemptions for property in which they have an ownership interest.
- Household goods, furniture, clothing, musical instruments and other personal items. Up to $5,000 per person and $300 per item. Since most couples jointly own their furniture and household goods, separate ownership is rarely an issue. It is extremely unusual for a Trustee to be interested in this property unless you have expensive antiques, musical instruments or collectables, because even expensive household items are typically worth a fraction of their original cost.
- Jewelry. Up to $500 per person. In reality, Trustees can often take diamond engagement rings but they usually do not unless it is valued in the thousands. Most people have more modest rings or, unfortunately, have already sold it to pay bills.
- Retirement Accounts are generally fully exempt, but keep in mind that you cannot dump cash into an account just prior to filing to exempt it.
- Annuities. Payments are often exempt if base on age and intended on replacing income.
- Wages owed to you are exempt for 30 times the minimum wage or 75% of wages owed to you.
- Tools of the Trade are exempt up to $1500.
- Alimony and Child Support. Generally, these are exempt to the extent necessary for support of the debtor and dependents.
- Wrongful Death awards are generally exempt to the extent necessary for support.
- Personal Injury Awards are exempt up to $10,000, not including awards for pain and suffering or compensation for actual pecuniary loss of the debtor or a dependent.
- Workers Compensation Awards, Unemployment Benefits, Veteran’s Benefits, Disability, Social Security and Health Aids are generally fully exempt.
- Wild Card Exemption. Each person may exempt an additional $600 in any property, plus up to $5,000 each of any unused Homestead exemption. Therefore, individuals who do not own a home or who have no equity in their home (or who do not want to keep the home) have $5,600 they can use on anything. It can be stacked on other exemptions. This is often used for cash, bank accounts, tax refunds, and other items that would be easier for a Trustee to take and liquidate.
If you are facing a Bankruptcy case and worried that you have personal property that is not exempt, keep in mind some additional reasons the Trustee will still not want to take your property. First, it is expensive to liquidate property. Even if you were a high income couple with a large house and expensive furniture, the Trustee would have to hire an auctioneer and pay them as much as 10-20% of the proceeds. In addition, the Trustee will incur legal fees to file all the necessary documents with the Court and additional time and expense in keeping a case open for a year or more. Most Trustees will want to net at least $10-15,000 after all of these expenses. Even in unusual cases in which the Trustee does want to liquidate property, they will almost always offer to “sell” it back to the debtors at a discount to avoid the additional expenses and they will usually accept a payment plan. This may mean that couples will not lose that expensive engagement ring. If you have a significant amount of equity in real estate or personal property, you may also consider a Chapter 13 case instead of a Chapter 7.
When people lose personal property in Bankruptcy, it is often because of poor planning and the failure to properly schedule the available exemptions. This is where a good Bankruptcy lawyer can more than pay for themselves, but you have to plan in advance and meet with a lawyer or two when you know you will be facing financial problems. A significant amount of time in the initial consultation will be spend on your exemptions and exemption planning. If you are in Georgia, either contact us or another good Bankruptcy lawyer in your area.