Exemptions protecting your property in bankruptcy.
You may have heard the phase “Most people keep all of their belongings in Chapter 7 bankruptcy.” The reason for this is phrase is the bankruptcy laws provide a list of exemptions for many things which allow those things to be exempt from being lost in a bankruptcy filing. The reason is that a person filing a bankruptcy could not be expected to get a fresh financial start in life without any possessions. Once the exemption for an item is compared to the fair market value of the item, there would be no non-exempt value left.
In Ohio the exemptions, per person, are: $132,900.00 for a primary residence; $12,250.00 for furnishings and clothing; $450.00 for cash or money in a bank; $3,675.00 for one vehicle; jewelry $1,550; tools of the trade $2,325.00; personal injury judgment $23,000.00; and wildcard (can be used on anything) $1,225.00. The cash value of a whole life insurance policy is unlimited, if the beneficiaries are spouse or minor child. And, most retirement accounts are unlimited if the account is ERISA qualified under IRS regulations (401Ks, many IRAs and some deferred compensation plans and some annuities.
What this means is that if the actual value does not exceed the exemption, you keep the item. If the actual value exceeds the exemption, you would have the right to keep the item if you pay into the bankruptcy estate the portion that exceeds the exemption. If you had more than one vehicle, you can only protect one and you can not split the exemption to cover all or a portion of more than one vehicle.
If you added up the portions of all assets that exceeded the total exemptions and you could not pay that much into the bankruptcy estate in a reasonable time (six months), you would either begin giving up assets until you could pay, or file a Chapter 13 and pay that non-exempt equity back over three to five years.
Ronald R. Stanley, Esq. has assisted individuals file Chapter 7 and 13 Bankruptcy for over 40 years. He is a member of the bar in Ohio (1974), Northern Ohio Federal District Court (1974) and 6th Circuit Federal Appeals Court (1977). 3637 Medina Road #5 in Medina, Ohio 44256, 330-952-1415 Phone, [email protected] email, rstanleylaw.com website