Exemptions In Bankruptcy

19 May What is the Wild Card Exemption?

In states that haven't opted out of the federal exemptions, such as Massachusetts, there exists something referred to as the "wild card" exemption. This is a very useful exemption and what allows most bankruptcy debtors to keep all their property. Section 522(d) of the Bankruptcy Code states, in relevant part: The following property may be exempted [...] (1) The debtor's aggregate interest, not to exceed $20,200 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. [....] (5) The debtor's aggregate interest in any property, not to exceed in value $1,075 plus up to $10,125 of any unused amount of the exemption provided under paragraph (1) of this subsection. Subsection five is the wild card exemption. These two subsections work together to allow the debtor who doesn't use the so-called federal homestead to exempt over $10,000 in "any property".
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14 May Bankruptcy, exemptions and a fresh start

My clients lately are so down on themselves that they insist on worrying that the bankruptcy trustee will strip them of everything, their home, their car, their consulting practice. Not so, I repeat, and repeat. FIrst of all, the bankruptcy trustee is only interested in assets that have net equity. So, the trustee is not going to "seize" your house where you owe more than it's worth. [The level of the client's fears are, I think, reflected in the choice of a word like "seize" with its connotations of violence.] The house has no equity, much less enough extra value to pay for the costs of sale and the trustee's commission to sell it. Likewise, the car. If there is no equity, "seizing" it doesn't benefit creditors. And bankruptcy trustees have no interest in taking something from a debtor if it doesn't result in money for the creditors. Most small personal service businesses have no value beyond the efforts of the owner. If the owner stops working in it, there is nothing of value that a buyer would pay for, in most circumstances.
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29 Mar Chapter 7 Debtor May Use “$0” Exemption on Asset Having Unknown Value; Mistaken Exemption Upheld

Grueneich v. Doeling, 2009 WL 605774 (8th Cir.BAP, Minn., March 11, 2009), held that a chapter 7 bankruptcy debtor can, in good faith, claim an exemption in an unknown amount ("0.00"), if the debtor has good reasons for doubting the value of an asset. In this case, the Eighth Circuit Bankruptcy Appellate Panel reaffirmed the continuing validity of In re Wick, 276 F.3d 412 (8th Cir.2002). The Wick case allowed a debtor to obtain an exemption up to the maximum dollar amount allowed by the exemption statute, even where the debtor listed the asset as having an "unknown" value, and listed the exemption amount as "unknown." In Grueneich, the bankruptcy debtor filed chapter 7 on March 27, 2007. He originally claimed two parcels of real estate as exempt pursuant to the federal homestead exemption, 11 U.S.C. section 522(d)1), in the amounts of $900.00 and $4,266.00. Neither of these were actually his homestead. He also listed stock in his corporation as having a value of "$0.00"; he did not claim any exemption for this stock. No objection to exemptions was filed. Over one year later, the debtor filed amended schedules B and C. This time, he stated that the "corporate/LLC debt exceeds the value of asset in all instances." He continued to value the stock at "0.00," and he claimed the stock exempt under section 522(d)(5) with a value of "0.00." The debtor included a notation that he was exempting any assets up the maximum dollar amount remaining under applicable law.
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