In simple terms, when you file for a bankruptcy you are allowed by law to keep all property that is labelled as except, according to the laws within your state.
Sounds pretty good, right? You file for bankruptcy, get to dismiss your debt, all while getting to keep your house and your car. However, it is not always as simple as that.
Because the exception laws vary from state to state, there are many different and dramatic ranges between what can be expected to be exempt and what cannot. For instance, in Texas (a place with very favourable exemption laws) you would be able to exempt your entire home, while in some states you can only make an exemption worth up to a few thousand dollars.
Fixed loop holes
In the past decade, one of the major bankruptcy loopholes was closed by the creation of new laws. This loophole was simply moving to a state that had better exemption laws. Now, you can still move states, but the exemption laws that will be used are those of the state you used to live in (as long as you had lived there for at least two years.) A bankruptcy lawyer will be able to help you determine which exemption laws you will have to work with if you are unsure.
In some states, such as California, you are able to change the status of your property immediately before filing your bankruptcy and it will be allowed as an exemption.
Know your state’s laws
Before venturing into bankruptcy, it is important that you understand what property you can expect to keep. This will allow you to properly maximize your exemptions before you have to file. Working with a bankruptcy attorney is an easy way to make sure you have a full grasp of the exemption laws available to you, and how best to maximize your value before filing for bankruptcy.
This post was written by Trey Wright, a bankruptcy attorney in Tallahassee, FL. Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.