Can someone explain exemptions to me?

[Lissy]

I've been reading through the threads here, but still having a hard time understanding exemptions. I filed Chapter 13 last week in Florida. The only personal property I have is my car. On my schedules, my atty listed the value at something like $6450 (not sure where he got that number), but I owe just over $8000 on it. So I have no equity in the car. We also listed a nominal amount for clothing, $1000 for my laptop and television, $50 in my checking account and my 401k balance (which is small too).

Are those things considered exemptions? I have no homestead to protect, so my understanding is that I could use that for other things? Can I use it for cash? I may be getting a performance bonus in my paycheck this week and I'm trying to determine if I might be able to exempt some or all of it. TIA!

[flyinbroke]

Check with your lawyer about assets. 401Ks are automatically protected by federal law. A lawyer will not use them as assets. Computer and TV sound high to me...these items lose a lot of value the second they leave the store. Your car's value depends on the trustee...some want trade in, others want to see retail and others take the middle road "private sale" price out of places like KBB and NADA. Many states have a "wild card" which can protect things above and beyond.

Many of these things become issues in a chapter 7, where things are liquidated. 13s seem to have more leeway since you are paying back creditors. Don't be afraid to ask the lawyer; it is part of what they are being paid to do.

[MSbklawyer]

Can someone explain exemptions to me

When you file bankruptcy, an estate comes into being by operation of law. That estate consists of everything you own. Theoretically that estate is liquidated (sold and turned into money) and the money is given to your unsecured creditors. An exemption is the right to keep certain items of your property from becoming property of that estate.

That's an oversimplification, but it will give you the gist of it.

[Lissy]

I understand that part, I just don't understand how they might apply to my situation. I own nothing of value, other than my car. And according to the valuation my lawyer came up with, I have no equity in the car. So if you don't own anything, are you allowed to exempt some cash? That's my main question, in the event I do get a bonus in my paycheck this week. I'd like to keep it if at all possible. If I can't legally, then such is life, but I'd be happier if I could. LOL And I will talk to my atty about this if it ends up happening, I just want to be able to ask somewhat intelligent questions.

[flyinbroke]

It depends on your state laws. Check with the lawyer. Since you are stuck in a 13, which tends to leave little wiggle room for emergencies, look for wildcard exemptions. You may be able to have a certain amount.

[SMinGA]

Exemptions tend to be about things you own as of the filing date. Income that comes in after you file may be another story. If the bonus is not a significant increase in your average income - it may not be an issue.

[momofthree]

Since you already filed, they shouldn't touch the bonus.

[Lissy]

Thanks. Gosh, I hate this waiting and wondering! It won't be significant, if significance is defined as 10% or more. Ten percent is the max I am eligible for and since I didn't work the entire year for this company, even IF I got the max percentage, it would be prorated.

[forgotten]

Since you already filed you need to notify your attorney. All of your disposible income need to be commited to the plan. Your attorney will be able to tell you if your trustee would be interested in the extra funds or not.

You are going to be asked at your 341 about your financial curcumstances and maybe be asked specifically about bonuses.

[Lissy]

I intend to notify my atty. I'm not trying to hide anything, I'd just like to keep it if at all possible. Legally of course.

[forgotten]

I intend to notify my atty. I'm not trying to hide anything, I'd just like to keep it if at all possible. Legally of course.

Absolutely, I hope you get to keep it! Its important to have an emergency fund in a 13 and that would help!

[forgotten]

You know... come to think of it... Your attorney may be able to ammend your exemptions and claim the amount exempt (assuming you have some wildcard left), under the theroy it was earned before you filed since the bonus was based on past performace, I assume.
If the attorney doesn't mention it run that by them!

[Lissy]

Thanks, I will! It is based on my 2009 performance, so it was technically earned last year.