What are bankruptcy exemptions and why are they important?
Bankruptcy exemptions are extremely important to anyone thinking about filing bankruptcy with equity in their assets. They are you financial “shield” and are what protect your stuff. For example, can you keep your car and furniture if you file bankruptcy? Will you be able to keep your house too?
These are all very important questions to ask and each state has different laws and amounts. In previous blogs, I delved into numerous exemption issues and questions for Nebraska and Iowa residents and you can find them by clicking here. Although exemptions are not the entire picture of what needs to be considered in protecting assets, it is certainly the most important one to start with.
New and improved bankruptcy exemptions proposed in Nebraska
Yes, it’s true! It’s a rare event, but, as of January 16, 2014, Legislative Bills 962 and 963 of the 103rd Nebraska Legislature second session contains two bills introduced by Sen. Lydia Brasch that propose to dramatically improve what people can protect if they file bankruptcy and/or from a creditor taking certain assets from you after a judgment is issued outside of bankruptcy.
Here are the highlights:
- Increases from $1,500 to $3,000 per person the protection for household furnishings;
- Increases from $2,400 to $5,000 per person for tools of the trade, INCLUDING a vehicle. (Note: The current exemption for a vehicle is only applicable IF it is used for work. The new exemption calls for exempting a vehicle no matter what it is used for.)
- Increases from $2,500 to $5,000 per person for any other personal property. This is commonly referred to as the “wildcard” exemption.
What impact will the new bills, if passed, have on bankruptcy in Nebraska?
Considerable. To begin with, an individual or couple who needs to file bankruptcy may be able to proceed under a Chapter 7 bankruptcy instead of the more protective and protracted Chapter 13 reorganizational bankruptcy. In many cases, people file a Chapter 13 bankruptcy to protect the equity in their assets but then are required to make payments to a Chapter 13 trustee for three to five years in exchange for the protection. With the higher limits proposed under the new bills, there is much more leeway and safety in proceeding with a Chapter 7 bankruptcy while not having to worry about a Chapter 7 bankruptcy trustee taking your vehicle, furnishings and other personal property.
Another benefit will be potentially lower Chapter 13 monthly payments. In certain cases where having too much equity causes your Chapter 13 payments to be higher, the new exemption amounts would definitely help. Although the proposed exemption increases are modest compared to other states (Iowa, for example, has a $7,000 per person exemption for a vehicle already), they would help keep bankruptcy payments more affordable.
Stay tuned to John T. Turco & Associates for the latest breaking bankruptcy news
Well, we’re not exactly CNN or Fox News, but John T. Turco & Associates is always at the forefront of the latest breaking bankruptcy news in Nebraska and Iowa and we’ll be reporting on these matters as they happen so as to provide our clients with the best financial solutions possible. If you have any questions, please feel free to contact me.