What is a Bankruptcy Exemption?

STATE AND FEDERAL LAWS PROTECT “EXEMPT” YOUR PROPERTY FROM YOUR CREDITORS.

What is a bankruptcy exemption? Bankruptcy exemptions are dollar amounts of equity that you will be allowed to retain if you file Chapter 7 or Chapter 13 bankruptcy.  You may elect to keep or surrender your property.

Some states allow residents to use generous federal guidelines for bankruptcy exemptions. Other states offer their own generous limits. Georgia has neither federal exemptions or generous state exemptions.

HOW DO WE KNOW YOUR PROPERTY IS PROTECTED?

Any equity that you own above the amount listed on the table below can be liquidated by the trustee to pay your creditors. There are, however, a few important reasons why your property won’t necessarily be liquidated.

Fair market value plays a critical role in determining whether your are protected by Georgia’s bankruptcy exemptions.  We will claim the allowed amount whenever possible.  Fair market value is not the same as replacement value, insured value, retail value–and it’s also not the pawn shop value.  Fair market value is the amount someone would reasonably expected to pay you on the open market.

For example, you home is currently worth $150,000 in today’s market. You have a mortgage for $130,000. It would appear that you might be held accountable for $20,000 in non-exempt equity (assuming you are filing alone). But, our state’s ‘homestead’ exemption exists to protect your equity and it allows you to keep your home when you file bankruptcy.

Below are many of Georgia’s bankruptcy exemptions. (Most of these are found in our state’s code books at O.C.G.A. 44-13-100 and following). This list is not intended to substitute for my careful and thorough analysis of your fact situation taking into consideration the actual language of the OCGA.

  • Your home $21,500 ($43,000 joint case)
  • Automobiles $3,500 in one car ($7,000 in joint cases)
  • Jewelry $500 ($1,000 in joint cases)
  • Furniture; Household; Clothing $5,000 ($10,000 in joint cases)
  • Tools of the Trade $1,500 ($3,000)
  • Alimony & Support As necessary for support
  • Life Insurance Proceeds As necessary for support
  • Workers Compensation 100% exempt
  • Wrongful Death Awards As Necessary for support
  • Retirement Accounts 100% exemptions for employer-funded Pensions, ROTH IRAs, and Traditional IRAs
  • Disability; Government Benefits including Social Security and Unemployment 100% exempt
  • Wild card exemption of $600 and up to $5,000 of the unused equity in the homestead.

WILL YOU BE ABLE TO KEEP YOUR HOUSE, RETIREMENT, CARS, ENGAGEMENT RING?

In general, you will be able to keep all exempt assets because they will be protected by Georgia’s bankruptcy exemptions. But you will need my help to determine what you can expect to claim as exempt.  Even if the asset is non-exempt you may not be handing it over to creditors.  There can sometimes be room to negotiate with trustees and/or creditors–whether it be negotiating the amount of nonexempt equity, or negotiating cash in lieu of a desired asset.

You hire me to tell you what’s at stake and also to plan for these negotiations.