So what are bankruptcy exemptions? Well, the short answer is they are what allow you to keep at least some of your property when you file a chapter 7 bankruptcy case. They also play a role in chapter 13 bankruptcy cases, but I’ll talk about that in a later post.
When you file a chapter 7 bankruptcy case, all of the property that you own can be taken and sold to help pay back some of your debt unless a Georgia bankruptcy exemptions can be used to let you keep your property. For example, in Georgia, you can exemptions that cover $10,000 worth of equity in property used as your primary residence ($20,000 if you are married). You can also keep $3500 worth of equity in an car that you own.
So how does this work exactly? We’ll use a car for our example. Let’s say that you own a car worth $5000 and you still owe $2000. In this example you have $3000 worth of equity in your car. If you did not have an exemption, then the bankruptcy trustee might try and sell your car so there would be some money to pay your creditors. The trustee would have to pay the $2000 that you still owed, but would then be left with $3000 to use to help pay some of your debt. However in our example, with the Georgia bankruptcy exemption for cars, you get to exempt the $3000 equity. So if the trustee wanted to sell your car, he’d have to pay you up to $3500 before he could take any money for the creditors. In this case, there would be no money left after the trustee paid you, so the trustee would not bother selling the car.
Applying the exemptions in any bankruptcy case can be a tricky exercise. If you live in the Newnan, Georgia area and have cars or houses or any other property that you own free and clear, or that is worth significantly more than you owe on it, you should definitely speak with me or another Newnan, Georgia bankruptcy lawyer before you consider filing a bankruptcy case. Making a mistake with your bankruptcy exemptions can definitely cause you to lose your property.