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If Bankruptcy is your Only Option - What Can You Keep After A Chapter 7?

If debt has piled up to the point of insanity, bankruptcy can be your only option. Under a chapter 7 bankruptcy, your assets are liquidated - but you can claim certain things as being exempt.

One Unusual Case That Went To A Higher Court

In one recent example, an unemployed woman with health problems was forced to declare Chapter 7. She claimed that an inherited $2 million dollar pension from her father should be exempt. The Chapter 7 trustee objected, saying that pensions from illness, etc, should only be exempt if it is the person's own illness. California, though, specifically allowed a debtor to receive a "payment under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of illness, disability, death, age or length of service, to the extent reasonably necessary for the support of the debtor." Fortunately for her (the pension was her only source of income) the court decided that as death was included, it clearly did not mean one's "own" death but could include a parent or spouse. Inherited IRAs, however, were not considered exempt, as the person can take a lump sum.

What about the rest of us? Most of us aren't living on an inherited pension. Chapter 7 bankruptcy is supposed to help you get back on your feet not turn you into a pauper. It depends in part on the value of the property.

One important aspect is the homestead exemption. This varies by state and does not refer to the value of your home, but rather the amount of equity you have in your home. If the amount of equity is lower than the homestead exemption, you get to keep your horse. If it is higher, then the trustee will sell your home to pay your creditors, but they do still owe you the amount of the exemption. A few states have no homestead exemption at all.

Household goods are generally exempt unless you have something unusually valuable, such as antiques or a Steinway grand piano. There is an exemption for the value of your car. So, for example, if your car is valued at $3,000 and your state's vehicle exemption is $5,000, you get to keep it. If your car is valued at $7,000, then the trustee may sell it and give you $5,000. In some cases, the trustee may abandon an item of property if it is very close to the exemption value - so if your car is valued at $5,500 you may get to keep it as it's not worth selling it to get the $500. Other exemptions include a tools of the trade exemption - if you need something to continue working, you can usually protect it. So, if you have that Steinway grand piano and use it to teach your music students, you can keep it. Most retirement accounts are exempt. Also exempt are damages awarded for personal injury.

You will definitely lose a second car or truck, second home, vacation home or timeshare. You are likely to lose at least some of your jewelry, if any of it is valuable.

Filing Chapter 7 Stops All Creditor Actions Against You

Filing for exemption automatically stays collection of that property until the case is determined. Also, most Chapter 7 cases are actually "no asset" cases - by the time most people end up filing for bankruptcy they have already sold anything they do not actually need, so it is certainly possible to get through Chapter 7 without losing anything. This may make Chapter 7 a better course of action than Chapter 13 (restructuring bankruptcy).

Make Sure You Have A Good Monmouth County Bankruptcy Attorney On Your Side

If you are in danger of ending up filing bankruptcy, you should contact a good bankruptcy lawyer and take their advice. They will be able to help you make the best decisions and avoid losing everything. In New Jersey, talk to Chapter 7 bankruptcy lawyer William H. Oliver in Neptune or Toms River.

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At the law offices of William H. Oliver, Jr. & Associates in Toms River and Lakewood, New Jersey, we represent clients in Toms River, Neptune, Trenton, Middletown, Red Bank, Wall, Lakewood, Lakehurst, Manchester, Asbury Park, Old Bridge, Jamesburg, Barnegat, Forked River, Manahawkin, Ocean Township, Brick, Manasquan, Howell, Freehold, Hazlet, Bradley Beach, Brown Mills, Long Branch, Keansburg, Marlboro, Bayville, Beachwood, Whiting, Sayreville, South River, East Brunswick, Monmouth County, Ocean County, Middlesex County, Burlington County and Mercer County.