For many people considering bankruptcy, one of the biggest impediments to filing is the incorrect assumption that filing bankruptcy means losing all of their possessions, or losing their house. This misconception can prevent someone from getting the legal help and protection they need through the bankruptcy process. Fortunately, it is possible for Chapter 7 and Chapter 13 debtors to keep most, if not all, of their personal possessions. This is done through the use of "exemptions."
Exemptions are provisions written into the Federal and various State bankruptcy laws. They state that certain kinds of property are to be excluded from the bankruptcy process. Each State is allowed to chose what is, and is not, covered as an exempt assets. When determining which ones apply to you, the first thing to figure out is what State's law applies to your case. This may not necessarily be the state you currently live in, if you have recently moved. Federal law has a provision to determine residency for bankruptcy purposes. The court looks at where you have lived for the previous 180 days before the day you filed and uses the rules of the state where you lived the majority of the time. For example, suppose you file bankruptcy on July 1. You moved from Arkansas to Oklahoma on February 2 of the same year. You have lived in Oklahoma for the majority of the 180 days (January 1 to June 30). Thus, Oklahoma law would apply to your case. But suppose you moved May 12. In that case, Arkansas rules would apply. Once you determine the state that law that applies, you must also determine if you are limited to the state rules, or if the federal rules are also available. Some states, like Arkansas, permit debtors to select between the State rules and the Federal rules, which can be advantageous, depending on the kind of property you are looking to exempt. Other states, like Oklahoma, limit debtors to just the state rules.
Once you determine what set of rules apply to your case, you can then figure out what property is exempted by those rules. Oklahoma has a broad set of rules that cover common types of property. Some of the most common exemptions used in Oklahoma bankruptcy are:
1. Homestead: a debtor is entitled to keep his principle residence, whether it is a constructed home on land the debtor owns, or a manufactured home.
2. Vehicle: a debtor (or each debtor, in the case of a joint bankruptcy) is entitled to exempt his interest, up to $7500 in a motor vehicle. This is the debtor's equity in the vehicle, so, whatever the value of the vehicle is minus the outstanding debt concerning it.
3. Household Goods and Furnishings: a debtor is allowed to keep the furnishings for his home, including furniture, appliances, a computer, and other home goods.
4. Guns: a debtor is entitled to keep up to $2000 in value of guns that are primarily used for personal, family, or household defense or sport. Guns held exclusively for investment or non-personal, family, or household use are not covered.
5. Clothing: Personal wearing apparel for the debtor and the debtor's family is exempt.
6. Tools and Equipment: a debtor may keep tools used for farming or for a trade or profession (such as carpenter's tools or mechanic's tools) are yours up to $10,000 in value.
7. Income: A debtor's income from employment is free of claims. This is accomplished by exempting the bank account where the debtor deposits his or her income. Similarly, tax refund created by the Earned Income Tax Credit is yours to keep.
8. Jewelry: Wedding sets and associated jewelry up to $3000 in value.
9. Retirement Savings: Funds deposited into an IRA or 401(k) or other retirement savings devices.
In Oklahoma, several other kinds of property are covered in addition to these common set out above. Furthermore, your State may have different rules from Oklahoma. You should consult a bankruptcy attorney in your state for more information.
Charles J Kania is a bankruptcy attorney in Oklahoma. His practice deals mainly with consumer bankruptcy, both chapters 7 and chapter 13. He represents creditors and debtors in the Oklahoma Federal Bankruptcy Courts. He is a content writer who writes easy to understand articles about bankruptcy. For additional information see his writings at: http://www.kanialaw.com/