How Do Bankruptcy Exemptions Allow You To Retain Ownership Of Some Of Your Assets?
Interviewer: What happens if the trustee wants to sell some of my assets to pay creditors? What are the trustee’s powers as far as that?
The Bankruptcy Trustee Looks At Assets You Owe Money On And If The Value Of The Asset Is More Than What You Owe
Vance: The bankruptcy laws permit exemptions to protect ownership. When you file bankruptcy, the trustees look at assets with equity. They do for something that they can sell. They look to see if you do owe money on an asset and if they can sell the asset for more than what you owe. They’re looking for assets with equity or assets that are free and clear but the bankruptcy laws do allow you exemptions.
Automobiles Are Common Exempted Assets
For example, the most common one is automobiles. If an automobile is free and clear, your exemption amount in bankruptcy is about $3,600, so if it’s your car, if you have a $5,000 automobile, as far as it’s Kelly Blue Book, that’s what they use, $3,600 of that is protected by your bankruptcy exemption.
The trustee would be looking at $1,400 from you. He doesn’t want to take the car from you. He wants the money so he would either sell it for a lump sum payment of less than $1,400 generally or he would take monthly payments until the $1,400 is paid off.
Interviewer: The trustees are not saying, “Okay, I’m going to seize all your clothes, all your jewelry, and we’re going to have a big garage sale.”
There Are Exemptions For Clothes, Jewelry, Furniture And Appliances
Vance: No. You have an exemption for clothes, there’s an exemption for jewelry, there’s an exemption for household goods. Your furniture and appliance exemption is $10,000 and that’s pretty substantial.
Most people may have paid more than $10,000 for furniture and appliances but they couldn’t sell it for more than $10,000. What the trustees looking at are fine jewelry, coin collections, gun collections, stamp collections, and grand pianos.
The State Of Ohio Recently Increased The Homestead Exemption
Homes were a problem until just recently. In the state of Ohio, they just increased the homestead exemption last March and each titled owner has a $132,000 exemption to protect their share of the equity. A married couple whose names are both on the house can have up to $264,000 of equity in their home and the trustee can’t touch it.