When it comes to the exemptions that you use for bankruptcy there are some things that you need to know to get the best possible results from your case. Some states allow a choice between state and federal exemption allowances but others only allow you to use the same set for all cases and do not have options in this area.
The exemptions are used differently under chapter 7 then they are under chapter 13 of the bankruptcy code. In a chapter 7 case the exemptions are used to determine what types and amounts of property that you can keep without it being taken to pay off debts. Any property that is not exempt in this type of case will usually be seized by the bankruptcy trustee and sold off to pay off a portion of the debt that you owe.
In a chapter 13 bankruptcy case the exemptions that you claim are used to calculate the specific amount that you must pay for any creditors who have unsecured debts that are not a top priority in the case. If you own a vehicle that has a value of $8,000 and the exemption used is $5,000 then your vehicle could be sold off.
The good news in this scenario is that you will get the cash value for the exemption claimed rather than keeping the vehicle. If the car is only valued at $4,000 and the exemption is $5,000 then the vehicle can not be sold and is exempt.
There is also a homestead exemption that may be claimed, and this may cover the value of the equity that you have in your home. If your home is worth $120,000, the mortgage loan that is still outstanding is $90,000, and you have $30,000 in equity then you may or may not lose the property, depending on the homestead exemption used. In most states the equity would be exempt and the home would be safe from seizure.
If you own the same home and it is paid off then you could end up receiving the cash amount of the exemption, depending on the bankruptcy trustee. The trustee must consider the costs that are involved if property is seized and sold, and there must be funds left over after the exemptions and costs to pay some on the unsecured debts owed. If this is not the case then the trustee will usually not sell the asset and you will be allowed to retain it.
The Wild Card exemption can be used for almost any type of property. Your bankruptcy attorney will go over all of your assets and property and then determine what exemptions you should claim. The wild card is usually reserved for property not fully covered under other exemptions, and may be used differently in each situation.
An experienced bankruptcy lawyer will use this special exemption in the way that benefits you the most and allows you to keep as much property as possible. In many cases the exemptions claimed may cover all of the property that you own and your creditors are left with nothing.