Chapter 7 personal property exemptions and wildcards

[Gixermeup]

If I understand this correctly the federal exemptions for personal property would be:
Personal property:14850 Wildcard:1475 Unused homestead:13950 Total personal property exemption $30,300?

And this does not affect the motor vehicle exemption as long as the value is under $4500?

[justbroke]

I don't think that's correct.

I think it's $1,475 plus the unused portion of the homestead exemption up to $13,950. My math may be a little off, but this means that you get up to $15,425 if you use not $1 of the homestead exemption. If you are married, and file a joint bankruptcy, you can double.

The motor vehicle exemption is a separate exemption.

[Gixermeup]

Well that would be the wildcard exemptions, so $15,425 I believe is correct.

But there is/what is the personal property exemption of "$700 per item / $14,875 total for animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments."?
Can I apply the wildcards to that, in theory giving me $30,300 to personal property?

[Gixermeup]

After doing more research it seems like you can combine the two but useally the wildcards are used for items that typically don't fall under a category, ie household goods.

[justbroke]

The wildcard is just that... a wildcard. It can be used to supplement any other exemption. So if you have a $1,000 TV, you can use $700 of the personal property exemption, and $300 of the wildcard exemption. I list that only as an example and not as an instruction.

That's why I won't say the personal property exemption is up to $30,300. It depends on how and why you use it. As soon as you use a portion of the wildcard for something that is not in that special list of personal property -- such as a vehicle -- the personal property exemption is now less. (A motor vehicle is personal property, but it has a separate exemption. Jewelry and "tools of the trade" are also personal property, but have separate exemptions, and are not part of the $14,875 exemption for personal property.)

Let's say your vehicle has $10,000 of equity. Well, you use $5,450 of the wildcard to protect the vehicle and you now have only $9,975 of "wildcard" left. So think of them differently. Think of it as each category I have $XX. If I exceed it, I have some money in another bucket to try to exempt that item at 100%.

I just don't like to lump a wildcard into one category. If you had a very specific scenario, I would say "yes, you exhausted that exemption amount, now take some from the wildcard to cover it."

I know my answer is nuanced, but when I fill out the form, I have to claim under which statute or law I claim an exemption. In my example about the motor vehicle, I would have to list two parts of the Federal exemption scheme to properly claim the exemption and protect 100% of the vehicle's edquity. Example $10,000; $4,55o 11 USC 522(d)(2), $5,450 11 USC 522(d)(5). As you notice, they are not lumped together.

(You'd need to have 21 items each at least $700 to exhaust the personal property exemption. That's why I say it's not $14,875 since that's just a cap.)

[bornfree2]

This is not legal advice just my personal experience. Always consult qualified legal and financial advice before and during a bankruptcy.

In my state the exemptions are very generous. I was able to exempt everything and therefore keep everything. But though generous it is not automatic. I had to learn what to exempt and how to exempt it.

As to what, it was important for me to realize that by default the estate gets everything on signing the petition. Thus if i didnt mention it in the assets listing Im abandoning my interest in it. I inventoried all the stuff in my home. I didnt worry about value I just wanted a full list as if I were doing a fire insurance inventory. I imagined that a liquidator would show up with a uhaul and my list of property...anything not on that list, well i didnt claim it so they could take.

Now of course you cant squeeze a long list into a small input box on the forms. And the official form instructions state to list items of $500 value on seperate list. Well turns out i dont really own any personal use property (furniture, clothing, etc) higher than than $500...BUT...again i had to get it on the list. So i made sure to describe things in broad strokes like 'books, personal notes and drawings, and misc'. Thiss advice I found in the various books I researched. I also found good descriptions in the RECAP filings. This gave me confidence that i listed everything (in broad strokes), so the fantasy uhaul-liquidator couldnt take anything cause everything that could be found was in fact on that property list (or at least argued that it was a kind of 'x' property category)

Now for higher value property that i absolutely did not want to lose -- like my car, some family heirlooms, tools of trade, etc, for some of those i applied the exemption wild card. So my beater car had a blue book value that was on the edge of the state exemptions for car. Since i didnt want any tug of war with trustee over different interpretation of values, i 'stacked' exemptions -- using one for the car as well as with the wildcard. As described above, this is done by listing the exact exemption law that is for the car and for the wildcard. Again view RECAP for how lawyers word this (its very simple, yet one bozo attorney wanted $3k to just look at my exemptions page...yeaaah no)

But exactly how much wildcard is applied to the car exemption? How can i say 'i want to put $1000 on top of the state car exemption'. The exemption form asks for an exemption value.. So i could put $7000 and that would be the upper limit for the car. But what if the trustee says 'ah, but i think i could sell the car for $7500... so therefore cut me a check for $500 to keep the car'.

Notice how they dont have to actually even auction the car, all they have to do is make a claim that they could get that amount and therefore since they already 'own' the car, they can set the price. So then whats the point of the exemption if the trustee can always go $1 higher than the value you put on?

And thats when the NCLC book came to the rescue. In their exemption section, they mention the use of "100% FMV - fair market value". That is to say I could apply the wildcard exemption for the full fair market value. Lets say my wilcard was $30k. Would my beater car ever fetch $30k? No of course not the fair market value is well below that. So how much of the wildcard would be applied? Well, the answer to that is given in the awesome NCLC book (also found in the free probono manual they have at their site. I strongly suggest anyone read that pdf backwards and forwards esp the section on exemptions.

tldr; by fully disclosing all my assets I was assured I claimed everything and thus trustee didnt get it by default. By exempting those items into proper exemption categories, i exempted them back to me. By using 100% FMV I applied the wildcard to specific property and in some cases stacked them with other exemptions for total protection.

As I result i 'bullet proofed' by petition and kept everything. The trustee was forced to 'fold' and write a No distributions report very soon after my 341 concluded. Now could the trustee still pursue that property. of course, but i properly applied the exemption laws as protection making it much harder (ie expensive) for the trustee (and thus creditors) to get near my stuff.

[bornfree2]

@Gixermeup - hope you are doing well! I was thinking about your post the other day. I asked what would i do differently if i had another go at this. Maybe these ideas can help you.

Basically id have spent a lot more effort in self liquidating and using the funds to buy up things in exempt categories. For example, i had a lot of misc electronic and books that if i had spent a good month i probably could have raised a couple grand.

Id then buy up items of personal necessity. Stuff like shoes, food stores, better clothing, car maintenance, etc,etc. With this inflation environment ive seen stuff i should have gotten prior to my bankruptcy already shoot up 30%. If i had only planned a bit further to my own future necessities Id gotten more from my money.

So the idea is rather than having the trustee liquidate for me and me stress/haggle over exemption limits, just self liquidate prior to filing and reallocate. But to be safe id make sure there was a good deal of time to do this kind of 'shuffling' of assets. Cause although 'exemption planning' is legitimate, it probably better to have some padding of time before file date. (even though i did some sale of assets a few days prior to my filing cause i needed cash to survive the months of the bankruptcy freeze)

In my state though the exemptions are very generous. But if i was in an non favorable exemption state id be thinking in that direction.

As always consult a good lawyer as your case is specific to you.