Property Exemptions

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Property Exemptions

Property exemptions are debtor’s properties, possessions, and other personal assets which are protected and exempted from creditor’s claims.

One of the positive things that a chapter 7 bankruptcy offers is that it provides the debtor with a clean slate. Also, it will bring and give that debtor a “fresh clean start.”

The property exemptions are a way for a debtor to still have ownership over some assests. In most cases, a debtor can retain ownership over all of his/her assets. Washington has a very generous exemptions in which you can legally retain your property but yet clear your debt load.

When you file for your bankruptcy, your attorney will prepare your bankruptcy schedules. They must include the list or schedule of your exempt property. This is where the property exemptions take place. Also, the fair market value of the property and its description should be included.

In addition to that, the kinds of properties and the amount of exemptions in bankruptcy vary and depend on the place where you reside and on the law of the state.

In the property exemptions, the debtor may use the exemptions provided by the IRS Code, or some states have the option of opting out and forcing the debtor to use the exemptions provided by the state. Furthermore, the trustee and creditors only have 30 days from the 341 meeting (meeting of creditors) to object to the claimed exemptions. Also, the Rule 4003(b); section 522(l) states that unless an objection is made, the property is exempted as claimed.

In addition to that, the kinds of properties and the amount of exemptions in bankruptcy vary and depend on the place where you reside and on the law of the state.

As a general rule, a debtor’s exemption does not avail against the holder of a valid consensual security interest in that property. By granting the interest, a debtor has effectively waived the right to assert the exemption against the consensual lien-holder. Statutory liens are also usually immune from exemption claims. Likewise, an exemption normally takes precedence over a judicial lien that attaches to the property – section 522(f)(1)(A).

Moreover, the debtor in a property exemptions may avoid a non-possessory non-purchase money security interest in specified household or consumer goods, tools of trade, or professionally prescribed health aides to the extent that the security interest impairs an exemption in such property – Section 522(f)(1)(B).

And if you want to keep your property that is only partially exempt, you must pay the difference between what you owe and the exemption. One important reminder also is that the exemptions are property of the estate until their status is clarified.

Bankruptcy law recognize that you will need certain things to live, a way to go to work, a salary, clothes, utilities, etc. The law of the state and the bankruptcy code understand and acknowledges these needs. That is why property exemptions are given and granted to you.

Call our office or schedule an appointment if you have questions regarding your financial situation.