Many people believe that they will lose everything they own if they file for bankruptcy. Not true. In fact, most people who file for bankruptcy do not lose anything they own at all.
How can that be?
Well, the secret lies in…
Most consumers file for Chapter 7 (or “liquidation”) bankruptcy. In a Chapter 7, exemptions determine what property you get to keep. If your property is exempt, whether it is your home, your car, your pensions, furniture, your clothes, etc., you can keep it during and after the bankruptcy. Exemptions protect your property and put it beyond the reach of the bankruptcy trustee (“trustee”).
If the property is nonexempt, then the trustee is entitled to sell it to pay your unsecured creditors.
In a Chapter 13 bankruptcy, it is the exemptions that determine how much you will have to pay to nonpriority, unsecured creditors.
If you are considering bankruptcy in Oregon or Washington, it’s important for you to understand how exemptions work and to know what property is exempt in those states. We can help. We have offices in Tigard, Salem, Albany, Grants Pass, Klamath Falls, Bend, and several other cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington.
A Little More About Exemptions.
Every state has its own set of bankruptcy exemptions and most states require that you use the state exemptions only. However, some states allow a debtor to choose whether to use state exemptions or federal bankruptcy exemptions. Like all states, Oregon has its own set of bankruptcy exemptions. But in Oregon, if you file for bankruptcy you can elect to use the federal bankruptcy exemptions instead of the Oregon state exemptions. In Washington, you can use either the federal exemptions or the state exemptions.
How Exemptions Work.
There is a lot to know about exemptions, but briefly, this is how it works: if you have property that is worth a certain dollar amount that is equal to or less than the exemption, you will be allowed to keep the property. If, on the other hand, the property’s value exceeds the exemption, it is highly likely that the trustee will sell that property and use it to pay your unsecured creditors. Why? Because the federal government assumes that honest debtors try to pay off their debts. So, if a debtor has excessive property, the federal government believes it should be sold to pay those debts. On the other hand, the bankruptcy laws are designed to give debtors a “fresh start” —– not to leave them destitute. As a result of these dual concepts, both state and federal bankruptcy laws provide debtors with property exemptions. Generally, Chapter 7 exemptions are far lower, stricter and are less flexible than Chapter 13 exemptions.
We Can Guide You Through It.
If you are considering bankruptcy and want to know what property exemptions you would be entitled to, contact us. We have offices throughout Oregon and in Washington, and we offer free consultations.