Many people that file bankruptcy keep all of their property, but there are situations where property can be seized during the bankruptcy process. Chapter 7 Bankruptcy is nicknamed liquidation bankruptcy because of this. Liquidation refers to the auctioning of property (liquidating it to cash) and applying the proceeds to the individual’s debts. A trustee is appointed in every chapter 7 case to review the paperwork and determine if there is any property that can be seized and auctioned off. In most cases there is not any property eligible to be seized. Exemption laws determine what property can be taken and what property can be seized. To make matters more complicated there are state and federal exemption laws. It may seem unfair, but the property that you get to keep will be different depending on what state you live in. This article will explain Mississippi’s exemption laws.
Can you keep your home when you file bankruptcy?
In Mississippi the homestead exemption determines whether you can keep your home when you file bankruptcy. The Mississippi homestead exemption is $75,000. That means that you can usually keep your home as long as you have $75,000 or less in equity in your home. Equity is portion of the value that is not covered by a lien. For example, if your home is worth $100,000 and your mortgage payoff balance is $75,000 then you have $25,000 in equity. Since $25,000 is less than $75,000 then you would be able to keep your home. If you have more than 75,000 in equity then it is possible that you home could be auctioned. If that happens, then the first $75,000 would be returned to you and any remaining proceeds would be applied to your debts.
If you live in a mobile home that isn’t permanently attached to real estate then the exemption amount is $30,000. If the mobile home is permanently attached to real estate then the $75,000 exemption applies.
What personal property can you keep when you file bankruptcy?
The Mississippi exemptions for personal property are limited to $10,000. If a married couple files together then the exemption is doubled to $20,000. There are several types of personal property that can be exempted. The most common types of personal property that can be exempted are:
- Vehicles: Most people that file bankruptcy can keep their vehicle as long as the equity in the vehicle does not exceed the personal property exemption. You must only count the equity in the vehicle when determining how much applies toward the exemption. For example, if your car is worth $10,000 and you owe $9,000 on your car loan then you only have $1,000 in equity. In this situation you can use $1,000 of your personal property exemption on your vehicle and you will still have $9,000 of unused exemptions that you can use on other types of property. Many people that file bankruptcy don’t have any equity in their car and they therefore don’t have to use any of the exemption amount in order to keep the car.
- Household Goods: The average person can keep all of their household goods when they file bankruptcy. Household goods are defined as clothes, furniture, appliances, 1 radio, 1 TV, 1 gun, 1 lawnmower, linens, china, crockery, kitchenware, personal effects and wedding rings. Household goods does not include artwork, jewelry and antiques.
- Other types of personal property that can be exempted include, books, animal, crops, cash, professionally prescribed health aids and any other property worth less than $200.
Can retirement, insurance or other claims be exempted?
- Retirement: Under Mississippi law most retirement accounts can be exempted. There is no limit to how much can be exempted in a retirement account. Many people make the mistake of cashing in retirement accounts to pay debts. You can file bankruptcy and keep your retirement account.
- Life insurance: Most life Insurance accounts are protected if you file bankruptcy
- Workers Comp: Most workers compensation benefits are also protected from bankruptcy.
What property is usually not protected?
The most common types of property that are not protected are:
- Bank Accounts - money held in a bank account can not be claimed as exempt. When you file bankruptcy you want your bank account balances to be low. Please note that cash can be exempted as personal property. Many people are able to withdraw money from their bank account and hold the money as cash instead.
- Businesses: If you own a corporation or LLC it usually cannot be exempted. If your business is valuable then the Trustee may seize it or its assets.
- Most lawsuits: Most lawsuits and claims are not protected in bankruptcy. If you win a case and get a settlement then the money must usually be turned over to the trustee. If there is any money left over after paying your debts, then the remaining balance would usually be paid to you.
Are you over the age of 70?One of the most generous exemptions that Mississippi offers is that individuals over the age of 70 are allowed to exempt any property up to $50,000, even types of property that are not usually exemptible. If a joint case is filed by two individuals over the age of 70 then the exemption is doubled to $100,000.