What are exemptions in bankruptcy?
When you file a chapter 13 or chapter 7 bankruptcy case you are allowed to keep what is known as exempt property and still discharge or erase debt. Essentially, a debtor can keep up to $50,000 of equity in a personal residence, condominium or coop apartment. Equity is what is left after subtracting the balance due on all mortgages from the market value of your home. If you own the property jointly with your spouse and you both file a petition, the exemption is increased to $100,000. In many cases, where the debtor has little or no equity in a home, the debtor is allowed to exempt up to $2,500 in bank deposits, U.S. bonds, cash or anticipated tax refunds. A debtor can also keep up to $5,000 in value of personal property such as household appliances, furniture, and personal clothing and up to $2,400 in value of one motor vehicle. A debtor may keep an unlimited amount of retirement benefits, IRAs, and qualified pension plans. Furthermore, cash value in life insurance is exempt.
