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Is My Property Exempt if I File for Bankruptcy?

Many people have suddenly found themselves in over their heads, unable to pay their bills and meet their financial obligations. In times of economic distress, more people turn to filing for bankruptcy—but they almost always want to know if they’ll be able to keep some or all of their property.

Bankruptcy exemptions distinguish between exempt and non-exempt property in Montgomery County, TX. The bankruptcy code allows clients—so long as they are honest about their belongings and their value—to declare certain amounts of assets as being off limits to the bankruptcy estate. They can continue to keep these assets throughout the proceedings and after the estate is settled. Here is an overview of how those determinations are made.

Chapter 7 bankruptcy exemptions

Bankruptcy cases list all the debtor’s assets and earnings as part of the bankruptcy “estate,” which the trustee can sell off and use to pay back creditors. Depending on whether you’re using state or federal rules, you may be able to protect certain non-exempt assets. Generally, if the asset isn’t something you’ll use for work or in your essential day-to-day living, it is non-exempt. This can include expensive collections (coins, musical instruments, family heirlooms), stocks, bonds, bank accounts and any second homes or cars.

In some cases, you’ll be able to keep things up to a certain value. For example, if you have an engagement ring worth $3,000 and the Chapter 7 jewelry exemption in Montgomery County, TX goes up to $5,000, you’re clear. If not, you may be forced to give up the asset, sell it and hand over the control to the bankruptcy estate.

However, some assets are protected. You should be able to keep some equity in your home, a motor vehicle, any pensions you’ve accrued, clothing and furnishings (to a reasonable extent), public assistance and all or part of unpaid wages. Stimulus checks, however, do not appear to be protected.

Chapter 13 bankruptcy exemptions

Chapter 13 bankruptcy works a little differently. There is still exempt property in Montgomery County, TX, but non-exempt property isn’t sold. Instead, if you want to keep it, you have to pay the value of your non-exempt property to the creditors in addition to the rest of your repayment plan. If you have a lot of non-exempt property, like home equity or second and third cars, this could add tens of thousands of dollars to your repayment total.

On the other hand, if you have very few non-exempt assets, Chapter 13’s payment plan can be a very useful tool to pay down your debt. Once you complete the plan, which is often over a period of five years, your remaining debt will be entirely wiped out. In many cases, the creditor agrees to take a much lower sum in order to get at least partial payment.

If you’re considering filing for bankruptcy, be sure to discuss exemptions and their consequences with your attorney. James R. Jones, Attorney at Law can help you understand bankruptcy exemptions in Montgomery County, TX. Call today to schedule a consultation.

James R. Jones, Attorney at Law.
James Jones, Esq.

Mr. Jones’ practice concentrates on business and consumer Chapter 7 bankruptcy
and he has been an attorney of record in several hundred such cases.