One of our clients' biggest worries when they come in for a bankruptcy consultation is whether the court is going to take away their stuff. And they're right to be concerned-- a bankruptcy trustee has the power to order turnover of certain assets to pay off debt in a bankruptcy. But one of the biggest jobs of a bankruptcy attorney is to advise clients how to protect their things, and we can often help our clients save their assets. For many of our Chapter 7 clients, we can protect everything they own using the bankruptcy exemptions. There are are two different sets of legal exemptions--state and federal--each with different strengths and weaknesses. Once we've had a chance to review what a client owns, we get to choose whichever set of exemptions is more beneficial.
Here are some of the most common exemptions:
Some amount of cash
Equity in your home (this is the biggest difference between the state and federal exemptions--the state offers a much larger home equity exemption)
Jewelry (including wedding ring)
Individual Retirement Account (IRA)/401(k)
Tools of the trade (things you need for a business)
Wildcard exemption (federal exemptions only--you can use this to exempt anything that is not covered by another exemption)
Each exemption has a dollar amount cap, but that will depend on whether you choose the state or federal exemptions.