Often times people who want to file for bankruptcy face the worry that if they file the Bankruptcy Court will take both their personal property and the home they live in. Nothing can be further from the truth. This false belief causes many honest people to avoid bankruptcy and to continue living their life’s with crushing debt. The reality of the situation is that the Federal Bankruptcy Code allows you to keep many of your assets, including your home through the use of whats called bankruptcy exemptions.
Exemptions are provisions written into the Federal and various State bankruptcy laws. They state that certain kinds of property are to be excluded from the bankruptcy process. Each State is allowed to chose what is, and is not, covered as an exempt assets. When determining which ones apply to you, the first thing to figure out is what State’s law applies to your case. This may not necessarily be the state you currently live in, if you have recently moved. Federal law has a provision to determine residency for bankruptcy purposes. The court looks at where you have lived for the previous 180 days before the day you filed and uses the rules of the state where you lived the majority of the time. To illustrate, if you file your case on July 1. You moved from Arkansas to Oklahoma on February 2 of the same year. You must have resided in the State of Oklahoma for the larger part of 180 days. Therefor, the bankruptcy rules in Oklahoma are applicable to your case. But suppose you moved May 12. In this instance, only the State of Arkansas rules will be applicable. Upon establishing the State law applicable, you must next figure out if you are limited to only that States bankruptcy rules or in the alternative if you are also entitled to use Federal rules. Some states, like Arkansas, permit debtors to select between the State rules and the Federal rules, which can be advantageous, depending on the kind of property you are looking to exempt. Some states, including Oklahoma, require you to use only the state rules.
Once you determine what set of rules apply to your case, you can then figure out what property is exempted by those rules. Oklahoma has a broad set of rules that cover common types of property. Some of the most common exemptions used in Oklahoma bankruptcy are:
1. Homestead: a debtor is entitled to keep his principle residence, whether it is a constructed home on land the debtor owns, or a manufactured home.
2. Vehicle: a debtor (or each debtor, in the case of a joint bankruptcy) is entitled to exempt his interest, up to $7500 in a motor vehicle. This is the debtor’s equity in the vehicle, so, whatever the value of the vehicle is minus the outstanding debt concerning it.
3. Household Goods and Furnishings: the person filing is able to keep his or her household furnishings, including but not limited to, kitchen utensils, small personal computer, beds, televisions and more.
4. Guns: a debtor is entitled to keep up to $2000 in value of guns that are primarily used for personal, family, or household defense or sport. Guns held exclusively for investment or non-personal, family, or household use are not covered.
5. Clothing: Personal wearing apparel for the debtor and the debtor’s family is exempt.
6. Tools and Equipment: a debtor may keep tools used for farming or for a trade or profession (such as carpenter’s tools or mechanic’s tools) are yours up to $10,000 in value.
7. Income: You wages from your job are yours free of creditor claims. The checking or savings account that you deposit your payroll check in is yours to keep. Likewise, Earned Income Tax Credits are considered exempt assets.
8. Jewelry: Your wedding rings and low value costume jewelry not exceeding $3000 of value.
9. Retirement Savings: Funds deposited into an IRA or 401(k) or other retirement savings devices.
In Oklahoma, several other kinds of property are covered in addition to these common set out above. Furthermore, your State may have different rules from Oklahoma. You should consult a bankruptcy attorney in your state for more information.