Once the bankruptcy is filed, all the property of the debtor at the time of the filing and certain other property to be received in the future becomes the property of the bankruptcy estate. This means that the bankruptcy trustee will take control of this property for purposes of satisfying the creditors. However, there is certain property which is either excluded or exempt and the debtor will be able to keep it. Property or asset exemption is determined based upon your situation, income and the laws of your state. The best way to determine which property to keep requires a detailed analysis of your situation. You need a good lawyer.

As for real property in many states, dependent upon which exemption scheme is selected and your circumstances, you may exempt up to $100,000 in equity. When calculating your equity you should use a value that is based upon a forced liquidation as opposed to the best selling conditions to arrive at a value for your home. Once you determine this value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity. As for personal property, in California, you are permitted exemptions for a variety of personal property. This includes automobiles, household furnishings and personal effects, jewelry, tools of the trade, retirement plans, un-matured life insurance, personal injury awards, earnings, animals and some other miscellaneous property. The value of each exemption and which exemptions can be used are determined by the statutory exemption scheme is selected. (State laws vary.)

Your House and Car

Depending upon which exemption scheme is selected and your circumstances, you may exempt up to $100,000 in equity. When calculating your equity you should use a value that is based upon a forced liquidation as opposed to the best selling conditions to arrive at a value for your home. Once you know the value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity. In a depressed market, liquidated properties are often valued less than what we like to think the property is worth.

Depending upon which exemption scheme is selected, you make keep your car if your equity is equal to or less than the allowed exemption. Generally speaking, depending upon the exemption scheme selected, you may exempt as little as $1200 or as much as $9100. When calculating your equity you should use the Kelly Blue Book or a comparable guide. Once you know the value, then subtract the amount owed from the value to calculate the equity.

Generally, most courts understand that you need a car to work to get back on your feet. Apply rules of common sense here: If you own vintage cars which are free and clear and worth thousands of dollars, you are probably not going to be able to keep them. If, on the other hand, you have a car worth $10,000 and you owe $8000 on it, you will most likely keep it. Again, the need to talk to a good lawyer should be evident. Most leased vehicles have no equity and therefore are entirely exempt. If you owe money on your car or it is leased you must still make the payments. In those instances you will have to redeem or reaffirm the property to keep it. However, in some circumstance your representative can renegotiate the loan or the lease to get a more favorable deal for you.

Disclaimer:
This information deals with Chapter 7 consumer bankruptcy. Each state has its own bankruptcy laws, so you need to check with your state for details. Information dealing with Chapter 13 bankruptcy and consumer debt restructuring is not discussed in the above FAQs. The information contained in the following FAQs is provided for general information purposes only and is not intended to be a legal opinion nor legal advice nor is it intended to be a complete discussion of all the issues related to the area of Chapter 7 consumer bankruptcy. Every individual's factual situation is different and you should seek independent legal advice regarding specific information.