Speak with bankruptcy attorney first. Most people are unfamiliar with the bankruptcy process. They know it can help eliminate debts but are not sure of the impact of owning assets. As a result, sometimes before going to see the bankruptcy lawyer the individual will transfer a vehicle into a relatives name or repay the relative with money received from a tax refund before seeing the lawyer. It is a mistake. First, any such transfers or payments must be reflected on the bankruptcy schedules. In addition in most instances the individuals could have filed bankruptcy and used exemptions to protect the assets. However, if they transfer the item or make the payment the trustee can overturn the transfer or payment and use it to pay your creditors. And even if you have exemptions available, since you voluntarily gave away an asset when the asset is brought back you cannot exempt it. So talk with bankruptcy attorney first if you are thinking about filing bankruptcy.
Exemptions are used to protect assets in bankruptcy. A trustee will not sell your assets in bankruptcy if they are exempt. Which exemptions apply depend on where you live and how long you have lived there. For example, if you live in Cherry Hill NJ and file a bankruptcy, you would generally have the option of using the Federal exemptions or the New Jersey state exemptions. In most cases the Federal exemptions would provide more protections than the NJ exemptions. In Philadelphia PA you would also have the option of using state or Federal exemptions. Some states opt out of the Federal exemptions and you can only use the state exemptions. Even if you are living in Cherry Hill NJ and file bankruptcy there, you may not be able to use the Federal or NJ exemptions. That is because if you have not lived in your state for the last 730 days, than you must apply the exemptions used by the state where you lived before the last 730 days. It is important that your attorney is made aware of where you have resided for the few years leading up to the bankruptcy.
Bankruptcy exemptions are used to protect assets when a bankruptcy is filed. For example, a Chapter 7 bankruptcy is also called a liquidation but the reality is assets are only liquidated if there is equity in the assets and the assets are not exempt. New Jersey and Pennsylvania bankruptcies rely primarily upon the federal exemptions. As of April 1, 2016 those exemptions have increased. For example if an individual files a bankruptcy and they own a home the exemption in their residence is $23,675. This is an increase from the $22,975 utilized prior to April 1, 2016. By way of example, if an individual owns a home worth $200,000 and there is a mortgage for $180,000, for bankruptcy purposes there is no equity since the equity in the home can be exempted. As a result, a Chapter 7 bankruptcy can be filed and the home would not be liquidated. Exemptions also exist for other assets. The new exemption amounts as of April 1, 2016 utilized in New Jersey and Pennsylvania for federal exemptions include $3775 for equity in a car, $12,625 for household goods and furnishings, and $1600 for jewelry. In addition to the exemptions being increased, other amounts also increased such as the maximum amount of unsecured debt in a Chapter 13 which increased from $383,175 to $394,725.