When a person in Long Island files for Chapter 7 bankruptcy, his or her property will be collected and then sold off to pay back his or her debts. This process is known as “liquidation.”
After the liquidation process is done, many of the person’s remaining debts may be discharged. The liquidation process may seem harsh as no one wants to be left with nothing after filing for bankruptcy. However, the law recognizes that people need certain types of property to get by, despite filing for bankruptcy. Therefore, there are exemptions that prevent certain types of property from being liquidated.
One common bankruptcy exemption is the homestead exemption. This exemption protects a person’s home from liquidation. But, this exemption is limited to a certain financial amount, above which a person’s home will not be protected. For example, the federal exemption for a home is approximately $20,000. Each state also has its own homestead exemption.
There is also an exemption for a car or automobile. Like the homestead exemption, there is a limit to the value of the vehicle that will qualify for the exemption. State automobile exemptions can vary. In 2010, the federal exemption for an automobile was capped at $3,225.
In addition, there are exemptions for certain types of personal property. For example, exemptions may exist for appliances, furniture, jewelry and clothing. But, these exemptions often limit how much personal property can be exempted.
What property is exempt from Chapter 7 bankruptcy is determined by state law and in some cases, federal law. Therefore, those in Long Island who want to know what Chapter 7 bankruptcy exemptions might be available might want to consult with a New York bankruptcy attorney for more information.
Source: FindLaw.com, “Bankruptcy Exemptions: Chapter 7,” accessed on Jan. 9, 2017
