Most people probably do not understand that 90% of the time when someone files a Chapter 7 bankruptcy they do not lose any of their property. This is because in a bankruptcy, you can keep all property which the law says is “exempt” from the claims of creditors. Exemptions can be determined under your state law or under federal law. In Kansas and Missouri, the exemptions are determined under State law. However, to claim the exemptions of Kansas or Missouri, you must have lived in the state in which you are filing for the two years prior to filing bankruptcy. If you have not lived in the state in which you currently live for two years, the answer to what you may exempt becomes more complicated.
Kansas exemptions include:
- unlimited amount of equity in your home, unless you purchased your home in the last 1215 days, in which case you may be limited to $125,000 in equity;
- $20,000 in equity in your car;
- household goods and clothing reasonably necessary for one year;
- $7,500 in things you need for your job (tools, books, etc.);
- Your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistance, pensions and most retirement accounts‑-regardless of the amount:
- $1,000 in jewelry and articles of adornment:
- Life insurance policies if opened more than one year before filing bankruptcy.
When a married couple files together, each is generally entitled to their own exemption.
In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture, appliances and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $25,000 car with a $5,000 car loan, you count your exemptions against the $20,000 which is your equity if you sell it.
While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.
So, if you have more debt than you feel you can afford, you should talk to a bankruptcy attorney to learn whether you may be able to get relief from your debt without losing any of your property.
