What Are Exemptions?
When filing bankruptcy it is possible to protect certain assets. What does it mean that an asset is protected? Unprotected assets may be repossessed or sold in order to pay debts, while protected assets are exempt—meaning the debtor may remain in possession of the asset. Assets that are protected often include things like residential property, vehicles, and jewelry. In some cases an asset is partially exempt and therefore some of its value must be repaid.
Exemptions per Bankruptcy Chapter
Exemptions will differ depending on a few things, one of them is which bankruptcy chapter you file. In a chapter 7 bankruptcy a bankruptcy trustee holds the ability to sell assets for credit repayment. Items in which you can get an exemption will remain out of the control of the trustee.
Chapter 13 is based on a repayment plan, and therefore allows the debtor to hold onto property and assets. Where exceptions come in is in the repayment. Only nonexempt items will be tallied for repayment. This means you will save money by not having to include exempted items in a chapter 13 repayment plan.
Federal Exemptions versus State Exemptions
While there are federal guidelines for exemptions, congress has allowed each state to opt out of using these guidelines. Washington allows people filing bankruptcy to select between the federal or state guidelines. For this reason, the debtor can look over both regulations and pick the one that best protects his or her assets.
One restriction an individual may encounter with exemptions in Vancouver WA include a limit on some equity. Property in which a loan is current, such as a house or car payment, generally will be made exempt. The asset and its equity are kept and payments continue.
As often is the case, there are specifics which will vary depending on each individual situation. A bankruptcy attorney will be able to go over the available bankruptcy exemptions for Washington residents.
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