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What You May Not Know about Bankruptcy Exemptions

Posted By Allmand Law Firm, PLLC || 30-Sep-2013

Bankruptcy exemptions play a big role during bankruptcy proceedings and they have different effects on each chapter filed. In short, they help you protect property and assets, while helping to keep repayment plan payments affordable. Each state has exemptions at different levels and they are available at the federal level to provide additional protection.

If you want to know how you are able to keep possessions such as your house, vehicle, jewelry, bank accounts, retirement funds, and other assets, consider the following points on how exemptions help protect such items from creditors.

  • Some state exemptions may provide protection up to a certain amount. A federal exemption may be able to provide full protection or help protect something that was not fully covered at the state level (also referred to as a wildcard exemption).

  • Some states may not have federal exemptions available to them, but instead have what is called federal non-bankruptcy exemptions. It's an option available outside of the bankruptcy code that can help protect assets for those in unique situations.

  • There are specific exemptions available by the state to help protect assets such as your home and vehicle. For instance, equity in your home may be protected using the homestead exemption. Your vehicle may be protected using the motor vehicle exemption.

  • Most often you have to use one set of exemptions either at the federal level or the state level. You may have the option to choose but qualifications may depend on how long you have been a resident of the state.

  • Exemptions help determine if your property can be exempt from creditors. In Chapter 7 bankruptcy, if property is considered exempt it cannot be used to satisfy creditors. In Chapter 13 bankruptcy exemptions may help determine how much you pay to creditors, but they help keep payments low.

Categories: Bankruptcy
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