Some people who are overwhelmed by debts worry that they might lose all of their property if they file for bankruptcy protection. The fact is that you are able to keep a significant portion of your property when you file for bankruptcy because of the state and federal exemptions. Both Arkansas and Oklahoma have a list of state exemptions that people can claim to exempt different types of property from their bankruptcy estates. In Arkansas, people also have the option to choose between the state’s exemptions and the federal exemptions. So can I file bankruptcy and keep my house and car? In most cases, yes you can.
Can I File Bankruptcy and Keep My House and Car?
Most people who file for bankruptcy protection are able to keep their homes and cars up to a certain value. Under Chapter 7 of the U.S. Bankruptcy Code, debtors are allowed to claim a number of different exemptions for certain types of assets. As long as the equity in the home or the value of the vehicles does not exceed a certain amount, you can keep your home and your car when you file for Chapter 7 bankruptcy.
If you have more equity in your home or have a vehicle that is worth more than the exemption amount, it is still possible for you to save both of them. Chapter 13 bankruptcy allows you to keep all of your property, but you will have to repay your creditors a portion of what you owe over a period of several years.
Available Exemptions for Arkansas Chapter 7 Bankruptcies
Can I file bankruptcy and keep my house in Arkansas? Chapter 7 bankruptcy is called liquidation bankruptcy because the trustee will sell any assets that you can’t exempt to pay part of the debts that you owe. In most Chapter 7 cases, the bankruptcy estate closes in a matter of months. Once the bankruptcy case is over, your remaining unsecured balances are discharged. This means that you will no longer have to repay the creditors of the discharged debts.
In Arkansas, you can choose to either take the state’s exemptions or the federal exemptions; you cannot pick and choose between the two. Both sets of regulations include exemptions regarding homesteads and personal property.
If you take the state’s exemptions, review the Arkansas Constitution to learn about the allowed exemptions. Regarding your home, you will be able to choose between two homestead exemptions:
- If you have a rural homestead (located outside any city, town, or village), you may exempt a homestead of up to 160 acres provided the value doesn’t exceed $2,500. You may exempt a rural homestead of up to 80 acres regardless of its value (Ark. Const. Art. IX, § 4).
- If you have an urban homestead (located inside any city, town, or village), you may exempt a homestead of up to one acre of land provided the value doesn’t exceed $2,500. The homestead may not be less than one-quarter acre of land, regardless of value (Ark. Const. Art. IX, § 5).
If you choose to take the federal exemptions, you can currently exempt up to $23,675 of equity in the value of your homestead. If the equity that you have in your home is less than this amount, you can keep your home under the federal exemptions.
What about your car? Although Ark. Code Ann. § 16-66-218(a)(2) exempts one vehicle up to the value of $1,200, this exemption was declared unconstitutional by the U.S. Court of Appeals for the 8th Circuit. Under the Arkansas Constitution, you may exempt $200 of personal property if you are single and $500 of personal property if you are married.
Under the federal exemptions, you can exempt up to $3,775 of the value of a vehicle (source).
Available Exemptions for Oklahoma Chapter 7 Bankruptcies
Can I file bankruptcy and keep my house in Oklahoma? In Oklahoma, you are not allowed to choose the federal exemptions and instead must take the Oklahoma exemptions. In the state, you can exempt your homestead regardless of its value as long as it is your primary residence. Your exemption is only limited by the amount of your acreage. People who live in towns or cities can exempt up to one acre while those who live in rural areas can exempt up to 160 acres. Oklahoma allows you to exempt up to $7,500 of equity in your vehicle.
Chapter 13 vs. Chapter 7
If your home or vehicle exceed the exemption amounts under Chapter 7, the bankruptcy trustee can sell the property, pay your mortgage lender or your auto loan lender what they are owed, use a portion to repay your unsecured creditors, and pay you the exemption amount. You might be able to talk the trustee into allowing you to pay the excess amount, but it would need to come from funds that are not included in your bankruptcy estate, such as a gift from a relative.
Chapter 13 bankruptcy might be an option for you if you have substantial equity in your home or vehicle and want to save them. In a Chapter 13 bankruptcy, you can keep your property. However, you will enter into a repayment plan for a duration of three to five years, during which you will repay a portion of the debts that you owe.
Talk to a Bankruptcy Lawyer
It can be difficult to understand the bankruptcy exemptions. Are you still wondering, “Can I file bankruptcy and keep my house?” We encourage you to discuss your situation with an experienced bankruptcy lawyer. Contact the Law Offices of Craig L. Cook today to schedule a consultation.