If I file a Chapter 7, what can I keep?

When debt consolidation and loan modifications haven’t worked, the only option may be to seek relief under Chapter 7 of the U.S. Bankruptcy Code. If that is what you decide to do, what property can you keep and what property will you lose? The answer will depend on the nature of the property and the value it has at the time of filing the Chapter 7 petition.

The value of an asset is determined on the day you file your petition. That is the day the “bankruptcy estate” is created. When you file for relief under the bankruptcy laws, the Bankruptcy Court takes control of the bankruptcy estate that includes all of your property. The bankruptcy estate is administered by the different levels of Trustees that make sure your exemptions are protected and that non-exempt property is identified and preserved for the interests of the creditors. In theory, whatever is non-exempt is to be sold and eventually distributed to the creditors that filed claims in your bankruptcy.

On March 27, 2013 the Ohio Homestead exemption increased to $125,000.00. This was a very significant rise of nearly 500%. Because of the way the new exemption statute was drafted, it again increased to $132,900.00 after just 4 days. The value of an exemption is the amount of the equity or the amount you own after the deduction of secured debt such as mortgages or other liens properly filed against the property in question. Therefore if the appraised value of your home is $200,000.00 and you have no mortgages against the property, your interest or equity in the property is the $200,000.00. You are only allowed to “keep” $132,900.00 as your exemption (the amount of the exemption applies to each titled owner on the deed). In this case, you would not be able to keep the residence without accounting for the non-exempt portion. If you had a properly filed first mortgage of $50,000.00 and a second mortgage of $30,000.00, your equity would be $120,000.00. You would be able to keep your residence because it would be exempt. Of course you would have to reaffirm and continue to pay the first and second mortgages. But there would be no non-exempt portion available for other creditors in the bankruptcy.

Ohio law defines the list of exemptions that are available in bankruptcy cases. See Ohio Revised Code 2329.66 for a complete list. The list has been updated, and effective 4-1-2013, the following are some of the more common exemptions that are available if you file a Chapter 7 bankruptcy:

1. Homestead exemption. You are entitled to keep $132,900.00 of value in a residence titled in your name. If you are filing a joint petition, each person can claim $132,900.00 as long as both names are on the deed. Please note that this exemption only applies to real estate you live in. If you own a piece of real estate but reside elsewhere, you may not be entitled to this exemption.

2. Motor Vehicle. $3675.00 in one motor vehicle titled in the debtor’s name.

3. Cash on Hand or Owed, Tax Refunds, and Money on Deposit.  $450 for each debtor. This includes the cash value in a whole life or investment based life insurance policy unless there is a qualified beneficiary. See me for details on this one.

4. Household Goods and Furnishings. $575 per item and jewelry up to $1,550 up to a grand total of $12,250.00.

5. Tools of profession, trade or business.  $2,325.00.

6. Earned Income Credit From Tax RefundUnlimited.

7. IRA, Rollover and Roth IRA. Unlimited

8. Personal Injury Settlement $23,000.00

9. Anything exempted by federal law. This generally includes pension, profit sharing, 401k.

10.The wild card. $1,225.00. You can apply the wild card amount to any asset that you need more equity protection up to the maximum.

Each of these bankruptcy exemptions are per individual. If you file a joint bankruptcy, the jointly owned household goods have an aggregate exemption of $24,500.00.

For more information contact me. www.candito.com

Every 3 years, Ohio law requires the numbers above to be adjusted to reflect the change in the consumer price index starting April, 2010.

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11 Responses to If I file a Chapter 7, what can I keep?

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  8. Dan J Falke says:

    I live in Ohio and am in a process of filling ch7——My fiancee died in 2003 and as part of her will, she has that I may state in this house that’s she owned free and clear for as long as I wanted provided I pay the property tax, up keep, etc. The house is now owned by my deceased fiancee’s brother-in-law. My question is, can I possibly lose staying here via the ch 7 trustee seeling my “life estate” to someone else?????—-thank you——Dan J Falke

    • That is a good question. Yes, the bankrutpcy Trustee can sell the life estate IF it is not exempt. If the property is going to be your primary residence, and the life estate is properly valued, you are entitled to the homestead exemption. I recommend that you discuss this matter with a local bankruptcy attorney to determine whether your life estate can qualify for an exemption.

  9. Megan Robinette says:

    We are currently in a chapter 13, but are struggling as the attorney wants to bump our payments up $1200 a month – which is unreasonable.
    We are $5000 in arrears on our current mortgage, but could file for a loan modification is that helps. We purhased a piece of property that is NOT mortgaged and is paid in full, however it is with the property and to be assessed it would all need done at the same time. Is there anything that I can do to save that? We just don’t know what all we would lose. We have a 4 wheeler as well…is that exempt?

    • If there are non-bankruptcy options that can pull you out of debt, you should always use them. I am not sure what you are in fear of losing if you are in a chapter 13 plan. The plan payments must be modified so that all your disposable income is available to pay into your plan and, if you are paying less than 100%, to make sure you pay into the plan the amount necessary for you to retain non-exempt assets. If your attorney is requesting that you increase your payments then either the Chapter 13 Trustee is requiring the modification or there must be some non-exempt property that he is trying to help you keep. No debtor attorney is going to require his/her client’s pay creditors any more than they need to. You need to have this conversation with your attorney.

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