What Property Can I Keep in a Bankruptcy?

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• Unlimited vs. Limited Exemptions
• What About My Wages?

A Chapter 7 bankruptcy is commonly known as a liquidation, because under the bankruptcy code a court-appointed trustee is charged with gathering and selling the debtor’s assets, then using those proceeds to pay off any creditors. However, many Georgians may misunderstand how the bankruptcy process and liquidation actually works. The trustee does not take all of your assets—and in many cases, you may not lose any property at all. The reason for this is that federal and state laws exempt a number of assets from bankruptcy proceedings. Bankruptcy itself is a federal process, but individual states can establish its own set of bankruptcy laws and require its citizens to use them. Georgia is one of those states.

Unlimited vs. Limited Exemptions

So what exactly can you keep in a Chapter 7 bankruptcy case? Some as are 100 percent exempt. This category includes most public benefits, such as Social Security, unemployment, workers’ compensation, veteran’s benefits, and any payments from pensions or court-ordered alimony or child support that is “reasonably necessary.” You can also generally keep all proceeds from life insurance and pension plans. In addition, federal law maintains a number of non-bankruptcy exemptions that protect government retirement benefits. For other categories of assets, Georgia law only provides a limited set of exemptions up to a certain dollar amount. For example, you may keep up to $5,000 of the value of any motor vehicles in your possession. If you own a car worth more than this exemption, the bankruptcy trustee has the right to sell the vehicle and give you $5,000 from the proceeds. The other critical dollar-limited exemption is for your “homestead” or primary real estate. While some states allow you an unlimited homestead exemption, Georgia only allows you to protect $21,500 of home equity. But if you are married, and you jointly own the property with your spouse, you can double the homestead exemption to $43,000. Some other limited exemptions of note include:

• Up to $5,000 in household furnishings, clothes used as wearing apparel, appliances, books, and other personal property used primarily by you and your family, provided no individual item may be worth more than $300;
• Up to $1,500 in tools or professional books used as part of your trade or business; and
• Up to $500 in jewelry.

There is also a $1,200 wildcard exemption you can use to exempt any property. On top of this amount, you can also apply up to $10,000 from the unused portion of your homestead exemption to protect any other property. A law firm or a qualified Georgia bankruptcy lawyer can advise you on how to use these wildcard and other exemptions to their maximum efficiency. Also, a bankruptcy attorney can provide legal advice about federal exemption laws, filing a bankruptcy petition and Georgia state exemptions.

What About My Wages?

Finally, Georgia allows employed debtors to exempt up to 75 percent of “earned but unpaid” wages from their job, which in no case can be less than 40 times the federal minimum wage (or $290 per week). Note this exemption only applies to wages earned before you file for bankruptcy. After you seek Chapter 7 protection, any wages you earn going forward are not considered part of the bankruptcy estate and thus yours to keep without restriction. For more information on this area of law, see our bankruptcy overview.