One of the most common questions people have when coming to a bankruptcy attorney revolves around their person property. A bankruptcy is stressful and heartbreaking, and the thought of losing prize personal possessions on top of everything else can be devastating to a family. However, like most questions around bankruptcy proceedings, the law is complicated. It varies state by state, as well. Rules and laws in one state about what an individual or family is allowed to retain after a bankruptcy and what will be discharged (or forgiven) can vary significantly. This is one reason, you need to seek out a competent attorney to help you deal with these emotional and complicated legal issues.
In most states, personal property is considered “exempt” or excluded from the bankruptcy filing. This means that such personal items as family photographs are exempt, in some states, to an unlimited amount. Such financial instruments as workman’s compensation and life insurance are also considered exempt. In terms of cash in the bank, it depends again largely on the state. In some states, up to $4000.00 can be considered exempt. Usually, a husband and wife filing a joint bankruptcy petition will each be able to use that exemption.
Other personal property, however, will have dollar limitations put on the amount you can claim as exempt. As an example, in the case of a motor vehicle, each owner is typically allowed a $2400 exemption. Personal injury lawsuit settlements are exempted to $15,000. Again, because each state has slightly differing rules, it is important to consult an attorney familiar with the laws in your states.
Another consideration in bankruptcy is that a creditor may ask the Bankruptcy Court to remove its debt from the debtor’s petition. This may be because it was based a loan that was approved under false pretences.
A debt that arises from criminal activity is also likely to not be allowed to be discharged. In this category, fines from drunk driving, or other criminal acts would not be excluded, as well.