What Property Can I Keep?

The vast majority of people who file bankruptcy are able to keep all of their property.

The law creates various categories of property and dollar maximums you can keep.  These are called exemptions. What you can keep is determined by these exemptions.

Long-term Wisconsin residents (over two years) can choose to use federal or state exemptions, but you can’t mix and match.  You must use all federal or all state.  A brief summary of exemptions follows.

Exemption amounts are doubled for married couples filing bankruptcy jointly.

What Exemptions Apply to Me?

By way of background, each state has its own exemption laws. In addition, federal exemptions are provided for in the bankruptcy law. In some states, like Wisconsin, you can choose between your state’s exemptions or the federal exemptions. In other states, like Tennessee, you must use your state’s exemptions.

In order to determine which state’s exemptions apply to you, look to where you lived during the last 730 days. If you have lived in one state, Wisconsin for example, for the entire 730 day period prior to filing, then Wisconsin exemption laws apply. If Wisconsin exemption laws apply, you can pick between the Wisconsin or federal exemptions. If you have lived in Tennessee the entire 730 days prior to filing the Tennessee exemptions apply, but you cannot choose the federal exemptions.

If you have lived in two or more states during the 730 days prior to filing we look to the 180 days preceding the 730 days before filing. In that situation, the applicable state exemptions are those for the state in which you lived for all or the majority of the 180 days preceding the 730 days before filing bankruptcy. If that state is Wisconsin you can choose between the Wisconsin and federal exemptions. If that state is Tennessee, you must use the Tennessee exemptions.

How Do I Value My property?

For exemption purposes, property is generally valued at what it would cost to replace it with a similar used item of the same age and condition.  So the value might be what similar items sell for on Craig’s List, ebay, Goodwill or a rummage sale.  This is generally substantially less than what you paid for the property.

What is Equity?

For property that is collateral for a loan, you need only exempt your equity in the property. For example, if you own a house worth $50,000 with a mortgage of $34,000 and a home equity loan of $6,000, you need only exempt $10,000 (i.e., your equity in the home).

Exemptions prevent the bankruptcy trustee from taking your property and selling it to raise funds for your unsecured creditors. Exemptions do not prevent “secured” creditors from taking their collateral if you are behind on the payments. In that case you should consider filing a chapter 13.