Are you one of the many individuals who are facing financial hardship? It is all too common in today’s economy for people to be facing an inability to meet their ongoing financial obligations. Many of these individuals are looking for help to fix their financial problems. One potential way to fix financial woes is by filing bankruptcy. Bankruptcy offers financially distressed individuals an option to eliminate their debt and hopefully move forward on the path towards financial freedom. But if you file for bankruptcy, what exactly are you allowed to keep in exchange for wiping out your debt? Let’s see.
Bankruptcy is a unique type of law. When an individual petitions for bankruptcy relief, they are required to disclose everything. 100% full disclosure. This is different than many other areas of law. This disclosure includes a full listing of all assets and potential assets that the debtor has. What is an asset? Assets would include things such as furniture, bank accounts, vehicles, properties, jewelry, etc. What are potential assets? Potential assets are things that do not have value right now, but may be worth something soon. These could include the right to sue someone for damages to the debtor received from a car accident, the right to receive money from an inheritance, etc.
The duty of a debtor to make this full disclosure is done under penalty of perjury. The penalty for making a false statement or concealing property under the bankruptcy code is a fine of up to $500,000 or imprisonment of up to 5 years, or both. This penalty is severe for a reason; to ensure that debtors tell the truth. In exchange for eliminating all of your debt, you must honestly disclose everything that you have.
When a debtor files for bankruptcy, they are not forced to turn over all of their assets to satisfy their debts. Their assets are protected by bankruptcy exemptions. What assets will be protected varies by state. There are also federal exemptions. Which exemptions you are allowed to use will depend on which state your state of residence. Some states allow you to pick either federal or state exemptions, while others have opted out of the federal exemptions and thus you are required to use state exemptions.
Exemptions are listed on Schedule C of the bankruptcy petition, and must be assigned to your assets. This must be carefully done to ensure that your property is protected. If your property is not properly exempted, you may have to turn over your assets to your creditors.
Nevada’s bankruptcy exemptions are quite pro-debtor when compared to many other states’ exemptions. A debtor in Nevada can protect up to $12,000 worth of household goods, furnishings, clothing and personal effects. A debtor in Nevada can protect up to $15,000 of equity in one vehicle. The equity is determined by taking the value of the car and subtracting any outstanding liens against it. A debtor in Nevada may protect $550,000 of equity in a primary residence that the debtor has lived in for at least 3.3 years. If the debtor has not lived in the residence for 3.3 years, then this exemption is reduced to $155,000 of equity. A debtor in Nevada may protect up to $500,000 in a qualified retirement plan, such as an IRA or 401k. A debtor in Nevada may protect up to $10,000 worth of equipment, inventory and other tools used by the debtor in their business or trade. A Nevada debtor may also be able to protect a cash value life insurance policy. Nevada also allows a “wildcard” exemption of $1,000 per debtor. This wildcard exemption may be used to protect any personal property of the debtor in addition to the exemptions listed above.
It is important to note that there may be limitations on these exemptions. It is recommended to seek out the assistance of a licensed attorney to discuss your specific situation.
By: Caleb Zobrist, Esq.