It’s one of the biggest misconceptions regarding bankruptcy. Unllike the popular game of monopoly, one doesn’t literally have to be out of houses and/or cash, and on their way to the poor house, in order to be bankrupt. This misconception is leading to more and more baby boomers spending every dime they have, and facing retirement with nothing, before they finally consider filing for desperately needed bankruptcy protection. And, of course, by the time reality hits, it’s way too late to recover and plan for those golden years.
To the contrary, however, the purpose of filing for bankruptcy protection is to provide a fresh start. More specifically, to allow one to be relieved from, or manage, debt that has gotten out of control while simultaneously saving homes, cars, wages, retirement accounts and other assets from some type of repossession or attachment by creditors. This can be done by maintaining precious savings, while simultaneously showing that there are no assets “available” for the repayment of debts.
So, which assets are “available” and which are not? To keep it simple, assets that are available to pay some or all existing debts, are those assets not protected through the use of exemptions. Examples of assets that are available would include, but not be limited to, regular earnings along with the value of existing assets, that contain equity, that cannot be protected by the use of available exemptions.
Exemptions are available to every debtor who files for bankruptcy. Exemptions are used to completely or partially protect the value of whatever asset the debtor wishes to keep…up to applicable available limits. Available for use, are Federal exemptions and State exemptions. Depending upon the State of residence, the debtor may have to use the available Federal exemptions or their State’s exemptions. For those who live in States that did not “opt out” of the Federal exemptions, there may be the option of actually choosing, between the two, to determine which set is most beneficial. For those who live in one State (or the District of Columbia) and own a business, or other real or major piece of property in another state, there may be the option of reviewing the benefits of both sets of exemptions, and thereafter, filing the bankruptcy case in the more favorable jurisdiction. Of course, there are other factors to consider, which include but are not limited to the length of residency, the value of the asset in a particular State, who else the property may be titled or owned with, etc.
More specifically, In Maryland there are exemptions for owner occupied residential homes, up to $22,975.00; for homes, held jointly by husbands and wives, that would protect the full value of the home (depending upon the circumstance); for financial accounts, cars and other personal property, up to $12,000.00, (keeping in mind that when valuing personal property, for bankruptcy purposes, the court only requires “yard sale” value). There are also exemptions for tools of the trade, home health aides, money acquired by victims of some personal injuries, insurance proceeds; for the full exemption and protection of the total value of ERISA qualified retirement accounts and more! So stop depleting those retirement accounts and other assets before you realize that bankruptcy may be the answer.
As shown, exemptions are most efficiently used to protect any remaining equity after considering any existing mortgage and/or other lien. For a complete list of State and Federal exemptions, visit http://www.legalconsumer.com/bankruptcy/laws/.
If a downward spiral to losing all assets is evident and a personal analysis and more information, on how exemptions save assets in a bankruptcy, is needed, contact The Kelsey Law Firm at (301) 390-9060 for additional assistance, including a proper and thorough case analysis.
Thanks for reading. Please note that I am licensed to practice law in Maryland and the District of Columbia. This topic was based off of general Federal and State laws of bankruptcy in and around the State of Maryland. Please note that every case is different and nothing herein is intended as specific legal advice. Please feel free to learn more about my practice at www.kelseylaw.net and to seek legal advice when you feel it necessary.
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