Many people hesitate to file for bankruptcy because they worry, “What property will I lose if I file for bankruptcy?” The property that you will be able to keep will depend on which type of bankruptcy that you file and whether you are located in Arkansas or Oklahoma. Each state has its own list of exemptions for property that cannot be taken from you by the trustee to be sold in a Chapter 7 bankruptcy. If you have non-exempt property, you might lose it in a Chapter 7 case. It is possible for you to save more property by filing for protection under Chapter 13 of the bankruptcy code.
What Property Will I Lose If I File for Bankruptcy?
There are state and federal exemptions available for property in Chapter 7 bankruptcy cases. In Arkansas, you are allowed to choose either the federal exemptions or those allowed under state law, but you may not choose both. Oklahoma mandates that people who file for Chapter 7 bankruptcy must select the Oklahoma state exemptions. If you file for Chapter 13 bankruptcy instead, your property exemptions are handled differently.
Under Chapter 13, you enter into a repayment plan to repay a portion of your debts over a period of time that lasts from a minimum of three years or up to five years. Since you are repaying your creditors under Chapter 13, your property is not liquidated.
Secured debts are also handled differently under both Chapter 13 and Chapter 7. Property such as your home or your car that have secured mortgages or auto loans may be lost if you do not continue making your payments. Bankruptcy does not destroy secured interests. However, if you have fallen behind on your mortgage payments and are in danger of foreclosure, filing for Chapter 13 bankruptcy might allow you more time to catch up on your payments, but you will need to also continue making your regular mortgage payments during the repayment period.
What Property Will I Lose If I File for Bankruptcy in Arkansas?
As we mentioned above, in Arkansas, you are allowed to choose either the federal or the state property exemptions. Under the federal exemptions, you can exempt up to $23,675 of equity that you have in the home in which you live. It is important to understand that your equity is not how much your home is worth. Instead, it is the amount of equity that has built up in it. For example, if you have a $100,000 mortgage and still owe $80,000, you can exempt the $20,000 of equity that you have. If you have more equity built up in your home than the exemption amount, you can choose to pay the difference between the exemption amount and the equity that you have built to your creditors or lose your home.
Under the state exemptions, you can exempt a home in which you live in urban areas if the home sits on a lot that is 1/4 acre or less. You can exempt a home in which you live in rural areas that sits on 80 acres or less. The Arkansas homestead exemption is not available to you if your property is larger.
The federal exemption for personal property is much higher than the exemption that is allowed under Arkansas laws. Arkansas has a personal property exemption of just $200, but that does not include your clothing. Under federal law, you can protect up to $3,775 in your vehicle, $1,600 of jewelry, $12,625 of total value for your household items, $2,375 of tools that you need for your trade, and $12,625 in loan value or interest in a life insurance policy.
In Arkansas, the public benefits that you receive from disability, workers’ compensation, or unemployment compensation are not included in your bankruptcy estate. They are also not considered to be income under Chapter 13. Money that you have received for a personal injury is protected under the federal exemptions up to $23,675, except money that you recovered because of pain and suffering or pecuniary losses is not exempt. Under the Arkansas exemptions, your IRA is protected up to $20,000. Under the federal exemptions, retirement counts that are exempt from taxes are also fully exempt. There is a limit on IRAs and Roth IRAs of up to a cap of $1,1,283,025, however. Finally, the federal exemption allows a wildcard exemption of $1,250 plus up to $11,850 of any portion of your homestead exemption that is not used.
What Property Will I Lose If I File for Bankruptcy in Oklahoma?
Oklahoma requires that all people who file for protection under Chapter 7 take the state exemptions. You are not able to choose the federal exemptions. In Oklahoma, the following exemptions are available to you:
- Unlimited exemption for your residence that is located on a lot of up to one acre in an urban area or up to 160 acres in a rural area
- Full exemption for many different types of personal property
- Up to $4,000 worth of clothing
- Guns up to $2,000 for household uses
- Personal injury recoveries up to $50,000
- Wedding rings up to $3,000
- Motor vehicles up to $7,500 of equity
- Tax-exempt retirement accounts are fully exempt
- IRAs and Roth IRAs up to $1,283,025
- Public benefits
- Tools needed for your trade for up to $10,000
- Many types of life insurance benefits
- Miscellaneous exemptions
Contact the Law Offices of Craig L. Cook Today
What property will I lose if I file for bankruptcy? It is important for you to talk to an experienced bankruptcy attorney at the Law Offices of Craig L. Cook to determine what property will be exempt. To keep more of your property, you might want to discuss filing for Chapter 13 bankruptcy. In most cases, people who file for Chapter 7 bankruptcy have more exempt property than they realize and lose very little. To learn more, contact us today to schedule your free consultation.