Bankruptcy exemptions are an important part of the bankruptcy system. In Chapter 7 bankruptcy, exemptions determine what property you get to keep, whether it be your home, car, pension, personal belongings, or other property. If property is exempt, you may keep it during and after bankruptcy. If property is nonexempt, the trustee is entitled to sell it to pay your unsecured creditors. In Chapter 13 bankruptcy, exemptions determine how much you will have to pay to nonpriority, unsecured creditors through your Chapter 13 plan.
If you are considering bankruptcy, it’s important to understand how exemptions work and learn what property is exempt in your state. Below is a brief explanation of exemptions. If you have any further questions, please give us a call.
Below is a non-exhaustive list of common exemptions utilized by debtors in Georgia:
Any equity in real estate, including a condominium, used as a residence, may be exempted by an individual up to $21,500.00. If both debtors file bankruptcy and the real estate is titled in both names, then the married couple can exempt up to $43,000.00 in equity. In the event title to property used for the exemption is in one of two spouses who is a debtor, the amount of the exemption is $43,000.00. Therefore, if title is held in only one married debtor’s names, but both spouses file jointly, the exemption increases from $21,500.00 to $43,000.00. Further, if title is held solely by one spouse, and she filed an individual bankruptcy case, she can also claim a $43,000.00 exemption.
2. Personal Property
Motor vehicles up to $5,000; clothing, household goods, appliances, furnishings, books, musical instruments, animals, and crops up to $300 per item and $5,000 total; jewelry up to $500; personal injury recoveries up to $10,000; and wrongful death recoveries needed for support.
3. Pensions and Retirement Accounts
IRAs and ERISA qualified benefits, as well as public employee retirement benefits such as pensions, may be exempted in full.
4. Tools of your Trade
Tools, books, and implements of your trade up to $1,500.
5. Alimony and Child Support
Alimony and child support needed for support.
Any property up to $1,200.00 plus any unused homestead amount up to $10,000.00.
How do exemptions help you in bankruptcy?
Now that we know some of the common exemptions utilized in Georgia, lets find out how they can help you. Exemptions remove the value of certain property from the estate. That means that the trustee cannot keep the exempted value. So, if you own property worth a certain amount, and that amount is equal to or less than the exemption amount available in Georgia, you get to keep the property.
For example, say you own a car worth $4,500.00, with no debt against it. Georgia has a vehicle exemption of up to $5,000.00. Therefore, if you file for Chapter 7 bankruptcy, you will get to keep your car because you can exempt the entire value from the estate. In the same example, if your car is worth $10,000.00, you may claim the $5,000.00 exemption for vehicles, and also claim up to $11,200.00 from your wildcard exemption (if you have not used that for your principal residence) to cover the additional $5,000.00 inequity in your vehicle.