I get asked this question a lot and it is because many people truly believe that after filing bankruptcy that they are going to lose all their assets they currently own and/or they have to wait a period of time to acquire an asset after filing.
But, in actuality the answer is almost always YES. You typically do not lose any assets after filing bankruptcy. You also can keep any assets acquired after Bankruptcy, unless you receive a sizable inheritance, a property settlement or life insurance benefits within 180 days of your discharge. But, again if the inheritance, settlement or life insurance is still within your exemptions, it is also safe from your creditors.
Areas of Exemptions
For an asset to survive the bankruptcy it must fall within one of the areas of exemptions that the State of Alabama allows. Your real property is entitled to a $5,000.00 exemption and your personal property is entitled to a $3,000.00 exemption. If you are married, you get to double those amounts to $10,000.00 and $6,000.00 assuming the asset is titled in both of your names.
For example, if you have real property that is worth $80,000.00 and you have a mortgage that is $75,000.00, then your home is safe as you are able to add your $5,000.00 exemption to cover your equity. Or if you are married and you owe $70,000.00 on that same piece of property, then your home is safe as you are both able to add $5,000.00 ($10,000.00 total) to cover your equity.
The same concept applies to the $3,000.00 personal property ($6,000.00 for married couples) to which your other assets fall under, such as vehicles, bank accounts, certificates of deposit (CD’s), Furniture, Tractors, 4-Wheelers and other like assets.
Some assets are 100% exempt and are in addition to the Real ($5,000.00) and Personal Property ($3,000.00) exemptions, such as Retirement Funds and 401-K’s that you or your employer funded with your income over the years. Other 100% exempt assets are worker’s compensation benefits, unemployment compensation, tools of trade, burial plots, clothing, Family portraits or pictures and my favorite a Church pew. That is correct, if you own a Church pew, no one can touch it, say AL Code Section 6-10-5. Also, if you were a victim of a crime, then your crime victim’s compensation is 100% exempt.
Bankruptcy is a complex area of law and at Bond & Botes, our affiliated offices offer free initial consultations. Please feel free to call one of our conveniently located offices to set up a private consultation with one of our experienced attorneys. We will analyze your situation and help you to make the best decision possible to help you eliminate that debt once and for all and help you keep your hard earned property.
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Grant McNutt is a Managing Attorney at the Bond & Botes Law Offices in Florence and Haleyville, Alabama. He holds a Bachelor of Science from the University of Alabama, and a Juris Doctorate from the Birmingham School of Law. He has been practicing Consumer Bankruptcy Law since 1999.Read his full bio here.