When filing for bankruptcy, it is important to know specific information that will help you decide which type of bankruptcy is best for you. One such subject is also one of the most misunderstood aspects of bankruptcy: how assets are dealt with. Some people say that filing for bankruptcy will make you lose your assets; some say you will only lose certain assets; some maintain that you will not lose any. These three statements are all technically true and all technically false; the deciding factors are the type of bankruptcy you choose and how many exemptions you are able to claim. Making a list of assets and belongings and determining which ones qualify for exemption can be difficult, but with the right information and the right attorney, you can have a much easier time.
Before you can make your list of assets, it is important to know just what an asset is. In the most basic sense, an asset is anything that has monetary value, such as a home or a PayPal account; in bankruptcy law, the list can be extended to include income as well. If you have a life insurance policy, it can count as an asset. If you won a civil suit, such as personal injury suit or a wrongful death suit, that compensation counts as an asset. Homes, vehicles, and properties are all assets. If you own anything of value, it is most likely considered an asset.
In the state of Utah, there is a code which allows certain exemptions. Other states might use a federal code, but Utah has its own, and it is important to comply with it. Most people, when filing bankruptcy, are most anxious about losing their homes or vehicles and are pleasantly surprised to find out that only Chapter 7 bankruptcies carry that risk, and even then, exemptions exist for those assets. Your home, for example, if you are filing alone, is exempted if it is worth $20,000 or less. If you are filing jointly, you can have an exemption of up to $40,000. In a Chapter 7, this means that you do not need to lose your home if it is worth less than the exemption; in a Chapter 13, your exemptions help determine your payment to your creditors. This is a similar policy to the one about vehicles, which states that you can have up to $2,500 exempted.
Although belongings are not traditionally considered assets, they can still be exempted; things like clothing are belongings, of course, as well as furniture, appliances, and other such items. Furniture not related to the kitchen is its own category; dining and eating furniture is its own category; items of sentimental value are their own category; and other various items, such as books and instruments, are their own category. Up to $500 of each category can be exempted. In addition, clothing, appliances, food, beds, and carpets can be exempted.
Other Important Exemptions
Aside from homestead issues and personal belongings, there are more things that can be exempted. Wages, for example, can be exempted up to a certain percentage. Tools and other work aids may be exempted up to $3,500. Pensions, public aid and benefits, insurance policies, and child support may be exempted. It is important to remember that most things that are considered assets come with exemptions; this is not the only reason to make a comprehensive and complete list of your assets, but it is one reason. It can help you make your own life easier and help you free yourself from difficulties during and after your bankruptcy.
These are technically called "nonbankruptcy exemptions" and deal with federal benefits. Retirement, for example, is a federal exemption, as are survivor's benefits, disability benefits, and military deposits. It is possible that few or none of these apply to you and your situation; that just means that you don't have as much paperwork to fill out! If you are not sure whether or not the federal exemptions apply to you, then they probably don't; however, it is in your best interests to look through all of your paperwork and correspondences to make sure you haven't missed anything. Your attorney may also be a valuable resource if you are not sure how to get started.