How to Figure Out Federal Bankruptcy Exemptions

If you are struggling with debt and feel that going bankrupt is your only option, it's important that you understand federal bankruptcy exemptions. In a chapter 7 filing, which is the most common, there are certain things that you are allowed to keep - no one can take them from you. There are other things that you'll have to give up in order to satisfy your debts. It's important that you understand what these things are so that you can make an informed decision about whether going bankrupt is right for you. Read on to learn how to figure out federal bankruptcy exemptions.

Things You'll Need

• Computer
• Internet

Instructions

1. 

   ~ Figure Out if your Homestead is Exempt ~

   If you plan to continue making your house payments, or your home is already paid for, you may be able to keep it - depending on its value. Federal law allows you to have up to $20,200 worth of equity in your home. However, state laws may allow additional equity to be exempt - but federal law places a cap on the total homestead exemption at $125,000 for any home that was purchased in the 3.5 years preceding a bankruptcy filing.

   To figure out the equity that you have in your homestead, you'll need to know your pay off and the distressed sale value of your home. A real estate agent should be able to help you come up with this number.

2. 

   ~ Your Automobile ~

   If you plan to continue to pay for your car or you own a car that is paid off, you may be able to keep it, depending on the equity. Federal law says that you can keep a car with a value of up to $3,225. The value of your car is based on what it would sell for. If you owe money, the value of the car is the difference between what is owed and what it would sell for.

3. 

   ~ What About Household Goods ~

   You get an federal bankruptcy exemption for household goods, which includes animals, crops, furniture, instruments, etc. The total for these items is $10,125. No one item can be worth more than $415.

   You may think that your items are worth more than $10,125 but the way you assess these amounts is by figuring out how much things would sell for at a garage sale.

4. 

   ~ You Can Keep Some Jewelry ~

   There is also an exemption for jewelry. You can keep up to $1,350 worth of jewelry.

5. 

   ~ Your Retirement Savings are Safe ~

   If you have any pension plans, IRA's, defined benefit plans, etc. those are safe up to $1,095,000. That means that no one can force you to access your retirement accounts to pay your bills under any circumstances. They are completely safe from bankruptcy proceedings. In many cases, retirement savings over a million will still be safe.

6. ~ Other Things You can Keep ~

   Some other things that you will be able to keep during a bankruptcy include tools that you use for work, life insurance policies, child support or alimony, settlements that you've received for personal injury up to about $20,000. You can also keep life insurance benefits if they are from someone who you relied on for you support.

Tips & Warnings

• Talk to an attorney who you trust to find out how these federal bankruptcy exemptions affect you. They can assist you with knowing exactly what you can keep and what you'll have to surrender during bankruptcy proceedings.

• Always check to see if state or federal bankruptcy exemptions are best for your situation. A good attorney will look at both of these and will tell you which is best for you.