I’m going to talk for a minute about the exemptions
that are available in bankruptcy, and by exemptions we mean property that’s off the table that
the trustee the creditors cannot touch he property and you continue to own it post bankruptcy. In discussing these keep in mind that I’m
giving you just the generalities here and in all of these different areas there are
specifics. And if ever the phrase the devil is in the
details is applicable it’s in bankruptcy law. So keep in mind that this is just a general
overview of the primary exemptions that are available. Number one is probably the homestead exemption
any equity you have in your homestead property is exempt regardless of the amount. That used to be a big deal here in Florida
over the last few years and equity in homes almost become a rarity. Next would be IRA and pension money. Any money that you’ve accumulated in your
401(k) or other type of qualified retirement plan are exempt from the claims of creditors
regardless of the amount. You also have an earned income exemption. And that is any income that you have earned
in the six months preceding the filing of the bankruptcy is exempt essentially regardless
of the amount. You have Social Security exemption benefits
that you are to receive or benefits that you have received from Social Security are exempt. However the exemption for accumulated Social
Security benefits is not absolute. There’s language in the law that says the
accumulated Social Security benefits that are reasonable and necessary to maintain your
lifestyle and the question always comes up well what does that mean? And that’s part of the dangerous aspect of
that is that it depends on a case to case basis. So you can’t guarantee that all accumulated
Social Security benefits are exempt. You’ve got a personal property exemption. Personal property can be both tangible personal
property your your your clothes your watch your furniture, and it can be intangible property
such as cash, CDs, stocks and bonds that you own outside of an IRA or pension. The law on personal property exemption is
that if you are not taking advantage of the homestead exemption, in other words you’re
underwater in your house or you’re renting then you each have each spouse if you’re filing
husband and wife jointly, each spouse has a total of $5,000 of personal property exemption. If you are taking advantage of Homestead because
you have equity in your home then that personal property exemption is only $1,000 each. You also have automobile exemption each person
has $1,000 of automobile exemption. Now, so you have your personal property exemption
and you have your automobile exemption to the extent that you do not use the personal
property exemption you can roll it over and use it on the car. So in theory between cars and personal property
you can have as much as $12,000 of exemptions. Now the key element there becomes, well how
do we value this personal property? What value do we put on our clothes or our
furniture and the good news there is that generally speaking I refer to it as garage
sale pawn shop value. It’s not what you would pay for it; it’s not
what you would have to pay if you went to the store to replace all your clothes. It’s what would they be worth if you had a
sale on Saturday and everything’s got to go by sundown. And in that world we would say generally that
the clothes would be virtually worthless and the furniture is not far behind. So $12,000 of personal property exemption
for furniture clothing cars can cover it off a lot of ground. Finally another critical exemption can be
what we call tenancy by the entirety’s property. Tenancies by the entireties property is essentially
property that a husband and wife owned together as husband and wife. This exemption comes into play when only one
of the spouses is filing and I often explain it this way. In a marriage there are two people but there
are three property owners. There’s the property that the husband owns. There’s the property that the wife owns and
then there’s this third property owner that’s the husband and wife together as husband and
wife. And if an individual is filing let’s say for
example only the husband is filing back bankruptcy so out of these three property owners the
creditors can only look to what the husband owns by himself what the wife owns we don’t
even list. Because he has no ownership interest in that
and what the husband and wife owned jointlly, we
list it but we exempt all of it as tenancy by the entireties. So those are your fundamental exemptions in
bankruptcy and as I said in the beginning, each one of those has certain nuances and
exemptions which can get real complicated so it’s very important that if you think you
have these exemptions to apply that you talk with a competent professional to make sure
that they apply in your unique circumstances.