Call Us Today: 229-888-1105
Address: 417 Pine Ave. Albany, GA 31701
Blog Layout
How Bankruptcy Exemptions and Equity Work Can Protect Assets
15 March 2022
This is a subtitle for your new post
One of the biggest concerns for many people considering bankruptcy is whether or not they can keep their assets. Whether this is a home, a car, your heirloom jewelry, or the equipment you need to earn a living, protecting your most important assets is vital to recover and rebuild when the bankruptcy is over.
But how do you protect these assets? Two key elements work together to accomplish this. Here's what you need to know about exemptions and equity in bankruptcy.
What Are Bankruptcy Exemptions? Exemptions in a bankruptcy case refer to which assets — and how much value — are protected (or exempted) from seizure to pay the person's creditors. Most states provide a list of exemptions that it allows, usually including a category and a dollar limit.
For example, Georgia bankruptcy law allows you to exempt up to $5,000 of value in one or more motor vehicles. So if you own a car worth $4,500, the trustee would not use it to pay off your credit card or medical debt.
Along with state exemption lists, the federal government provides a list of its own. States may or may not allow a filer to use the federal exemptions . And these also may or may not be more beneficial. The same car owned by the Georgia resident above would only see $4,000 of its value exempted and the remaining $500 in play.
Bankruptcy exemptions vary by state. They commonly include many of the same categories, such as real property, retirement accounts, vehicles, work-related tools, jewelry, and personal property. Many states (and the federal list) also offer what's known as a wildcard exemption — a dollar amount you may generally use to exempt any property you choose.
What Is Equity? To use exemptions correctly, you must also understand how the value of assets is determined. If you own an asset like your car free and clear, your value — referred to as your equity — is its full value. However, what if you still owe money on a car loan? You would now calculate your equity by subtracting what you owe from what it's worth.
For example, consider the Georgia car owner above. What if their car is worth $9,000 on the auto market but they carry a loan with $2,000 still due. The value for exemption purposes is not $9,000 but rather $7,000 ($9,000 - $2,000). Of this, $5,000 could be exempt under federal bankruptcy guidelines. The gap that the borrower must fill is not $4,000 but only $2,000.
When you consider the actual equity in some assets, you may find that things work out better for you than they first seemed. A homeowner can exempt $25,150 of equity in their home, for instance, but this is much less than most homes are worth.
However, if your home is valued at $200,000 but you owe $175,000 on it, that property is fully exempt. Your equity is only $25,000 — just under the qualifying threshold.
In addition, things like a wildcard exemption can help as well. If your mortgage is for only $174,000, you would still have $850 subject to seizure. But you may be able to use $850 of the federal wildcard exemption to cover the rest and save the home.
Where to Learn More Like many facets of bankruptcy law, exemptions and equity calculations can be confusing. The best place to begin is to learn more about how they work in your state and how they affect your specific assets. Custer, Custer & Clark LLC Attorneys at Law can help.
We'll assess your financial situation, debts, and assets to draw up a plan that protects the things you value the most. Call today to make an appointment or get answers to your questions.
But how do you protect these assets? Two key elements work together to accomplish this. Here's what you need to know about exemptions and equity in bankruptcy.
What Are Bankruptcy Exemptions? Exemptions in a bankruptcy case refer to which assets — and how much value — are protected (or exempted) from seizure to pay the person's creditors. Most states provide a list of exemptions that it allows, usually including a category and a dollar limit.
For example, Georgia bankruptcy law allows you to exempt up to $5,000 of value in one or more motor vehicles. So if you own a car worth $4,500, the trustee would not use it to pay off your credit card or medical debt.
Along with state exemption lists, the federal government provides a list of its own. States may or may not allow a filer to use the federal exemptions . And these also may or may not be more beneficial. The same car owned by the Georgia resident above would only see $4,000 of its value exempted and the remaining $500 in play.
Bankruptcy exemptions vary by state. They commonly include many of the same categories, such as real property, retirement accounts, vehicles, work-related tools, jewelry, and personal property. Many states (and the federal list) also offer what's known as a wildcard exemption — a dollar amount you may generally use to exempt any property you choose.
What Is Equity? To use exemptions correctly, you must also understand how the value of assets is determined. If you own an asset like your car free and clear, your value — referred to as your equity — is its full value. However, what if you still owe money on a car loan? You would now calculate your equity by subtracting what you owe from what it's worth.
For example, consider the Georgia car owner above. What if their car is worth $9,000 on the auto market but they carry a loan with $2,000 still due. The value for exemption purposes is not $9,000 but rather $7,000 ($9,000 - $2,000). Of this, $5,000 could be exempt under federal bankruptcy guidelines. The gap that the borrower must fill is not $4,000 but only $2,000.
When you consider the actual equity in some assets, you may find that things work out better for you than they first seemed. A homeowner can exempt $25,150 of equity in their home, for instance, but this is much less than most homes are worth.
However, if your home is valued at $200,000 but you owe $175,000 on it, that property is fully exempt. Your equity is only $25,000 — just under the qualifying threshold.
In addition, things like a wildcard exemption can help as well. If your mortgage is for only $174,000, you would still have $850 subject to seizure. But you may be able to use $850 of the federal wildcard exemption to cover the rest and save the home.
Where to Learn More Like many facets of bankruptcy law, exemptions and equity calculations can be confusing. The best place to begin is to learn more about how they work in your state and how they affect your specific assets. Custer, Custer & Clark LLC Attorneys at Law can help.
We'll assess your financial situation, debts, and assets to draw up a plan that protects the things you value the most. Call today to make an appointment or get answers to your questions.
Filing for bankruptcy can help you get rid of most of your debts, if you are careful. Here are common bankruptcy mistakes to avoid as you file.
Even the most financially disciplined and prudent individuals can find themselves in debt. And sometimes, the best way out of unmanageable debts is to file for bankruptcy.
Filing for Chapter 7 bankruptcy can be a complicated process. Learn what documents are required and what documents will help your case.
Some individuals shy away from talking about bankruptcy because of all the myths surrounding it. Learn the truth by reading this blog.
If you want to take a house loan, lenders look at different factors, including bankruptcy status. Read on to learn about getting a mortgage post-bankruptcy.
Can you improve your credit score during chapter 13 bankruptcy? You can. Discover some tips to help you enhance your credit score.
Do you plan to file bankruptcy but also need to — or choose to — move at the same time? Discover a few important answers to common questions.
One often-overlooked element of all bankruptcy filings is the automatic stay. What is this stay? How can it help you? Discover a few answers.
Bankruptcy cases don't always go as planned. Job loss is one adverse situation that can affect your bankruptcy. Learn more about the effects.
Do you plan to file for bankruptcy? How does your bankruptcy affect your estate plan? See the answers to a few common questions on the subject.