Protecting Property Using Bankruptcy Exemptions

When my clients file bankruptcy in Decatur, Georgia, they often want to know if they can keep their property in Chapter 7 or Chapter 13 bankruptcy. Protecting property using bankruptcy exemptions is possible in Georgia. The good news is that you can definitely keep property, such as cars, homes, and bank accounts in bankruptcy.

Protecting Property Using Bankruptcy Exemptions in Decatur, Georgia

Decatur bankruptcy filers, like all people who file bankruptcy in Georgia, are entitled to what are known as “bankruptcy exemptions.” The exemptions are provided by Georgia law and applied through the bankruptcy law to allow people who file bankruptcy to protect their property. There are several popular exemptions as outlined below.

Homestead Exemption

If you own a home in Decatur and file bankruptcy, you are allowed a homestead exemption to protect up to $21,500.00 ($43,000.00 total if a married couple owns the home and files jointly) in equity as provided by O.C.G.A. 44-13-100(a)(1). Most debtors do not have equity in their homes, especially in this economy. However, if you own a home and owe less on the home than the fair market value of the home, then you may have equity in the property and need to use the homestead exemption allowed under Georgia law in order to protect your home.

For example, if you owe $100,000.00 to the mortgage company on your house, and the Dekalb County tax assessor valued your home at $150,000.00, you could potentially have $50,000.00 in equity in the home. Under that scenario, you could use the $21,500.00 homestead exemption in a bankruptcy case in order to protect $21,500.00 in equity. Even with that homestead exemption, you would still have $28,500.00 in unprotected equity if you filed bankruptcy.

Under such circumstances, you could either file Chapter 7 bankruptcy and allow the trustee to attempt to sell the home and use the proceeds to repay creditors, offer the Chapter 7 trustee a sum of money to purchase your unprotected interest in the home, or file Chapter 13 and repay unsecured creditors at amount equal to the unprotected interest (in this case, $28,500.00). Now, if your home were only worth $100,000.00, then there would be no equity in the home and it would not be lost to the bankruptcy trustee (however, if you stopped paying the mortgage company, the mortgage company could foreclose).

Meeting with a bankruptcy attorney in Decatur, Georgia will give you the ability to analyze if the Georgia homestead exemption protects your home before you decide if filing bankruptcy is a good option for you.

Vehicle Exemption

Most debtors in Georgia own at least one vehicle, and debtors often worry about whether filing bankruptcy could cause them to lose their cars. Fortunately, bankruptcy law also provides protection for cars. Pursuant to O.C.G.A. 44-13-100(a)(3), a car has up to $3,500.00 in protection from sale or liquidation in a bankruptcy case. If a married couple files bankruptcy and each spouse owns a car, each may take a $3,500.00 exemption for his/her car.

The vehicle exemption is applied the same way as the homestead exemption. For example, you own a car that is worth $10,000.00. You owe $8,000.00 on the car. That means you only have $2,000.00 in equity. You may take $2,000.00 of the Georgia bankruptcy exemption for vehicles and apply it to your car. On the other hand, say you only owe $5,000.00 on the same car. That means you have $5,000.00 in equity and only have $3,500.00 to protect the car, leaving $1,500.00 in unprotected equity in the car. There’s no need to worry, as you may be able to use the wild card exemption and the unused portion of your homestead exemption to protect the remaining $1,500.00.

Wild Card Exemption

All debtors in Dekalb County, Georgia, have a “wild card” exemption under O.C.G.A. 43-13-100(a)(6) in the amount of $600.00 to apply to any type of property. In addition, debtors who do not use their entire homestead exemption can take up to $5,000.00 of the homestead exemption and apply it to any type of property.

For example, if you only used $5,000.00 of your $21,500.00 homestead exemption and had an additional $1,500.00 in your car to protect, you could cite the wild car exemption in order to protect your car in a bankruptcy filing.

Retirement Account Exemption

Under O.C.G.A. 44-13-100(a)(2.1), retirement accounts governed by ERISA (most 401Ks), Individual Retirement Accounts (IRAs) and other pensions are protected in full from liquidation in bankruptcy, as long as they remain undistributed. Thus, no matter how much you have in your employer sponsored retirement account, it is fully protected, so long as you keep the money in the retirement account. If you liquidate the retirement account, then it is converted to cash and is only protected up to the amount of the wild card exemption of $600.00 and the unused portion of the homestead exemption for a maximum protection of $5,600.00 under Georgia bankruptcy law. So, the best thing to do is to keep your retirement in its account to avoid losing your retirement savings in a bankruptcy case.

Now, you need to be careful about property, such as annuities or life insurance policies that may seem like retirement accounts but are not actually protected retirement accounts.

Household Goods and Furniture Exemption

One of the most popular questions debtors ask is will the court or trustee come to my house and take my things? The answer, the trustee technically can do that in a Chapter 7, but is most likely not. As with most property, there is an exemption for household goods and furnishings. In Georgia, that exemption is $5,000.00. Since you should be using garage sale value for such items in your home, it is unlikely that you own anything that exceeds the available exemptions for home goods and furnishings.

Jewelry Exemption

If you’re filing bankruptcy in Dekalb County and you’re worried about your jewelry, don’t worry because there is a $500.00 exemption for jewelry under Georgia law. In addition, if you have any valuable jewelry, you can use the wildcard exemption and the excess homestead exemption to protect the jewelry from liquidation.

Protecting Property Using Bankruptcy Exemptions in Georgia

If you live in Decatur, Georgia and are interested in filing bankruptcy, one of your main concerns is probably whether you can keep your property in a bankruptcy case. The answer is probably yes. Even if you own property that is not fully protected by the Georgia bankruptcy exemptions, a bankruptcy attorney can assist you in determining what you can and cannot keep in crafting a Chapter 13 repayment plan that will allow you to keep all of your property, no matter how valuable it is.

If you have questions about protecting property under bankruptcy, please call Decatur bankruptcy attorneys at the Law Offices of Law Offices of Charles Clapp at 404.585.0040 for a free consultation.