A debtor may maintain some assets or property even after filing for bankruptcy, thanks to an exemption. Exempt property cannot be confiscated or sold to pay the debts of the individual filing for bankruptcy, and the exemptions are set forth in the statute.
In both Chapter 7 and Chapter 13 bankruptcy, exemptions are crucial:
- Chapter 7: Exemptions in Chapter 7 bankruptcy assist in determining which property you are allowed to keep after receiving a bankruptcy discharge. This is how bankruptcy exemptions assist in defending your possessions during bankruptcy.
- Chapter 13: Exemptions in Chapter 13 bankruptcy help determine how much you will have to pay to your unsecured creditors, which might mean the difference between your plan being approved and being rejected.
Delaware’s Exemptions
Anyone facing bankruptcy may start to doubt their identity and place in the world. It’s not an easy condition to deal with, but given the incessant calls from creditors, the mounting invoices with all kinds of threats attached, and the numerous situations a debt crisis can bring you, it could seem like your only option.
The following list includes many of Delaware’s most popular bankruptcy exemptions. According to the legislation, only the state’s exemption system may be employed while declaring bankruptcy in Delaware. Keep in mind that in Delaware, a single person’s exemptions for personal property or equity in real estate other than a principal residence cannot total more than $25,000.
Married couples may qualify for larger exemption amounts.
- Homestead (equity in dwelling used as residence)
- Equity in automobile
- Up to $15,000 in value in one motor vehicle used as a “tool of the trade”
- Personal property
- Family bible, school books, and family library
- Family pictures
- A seat or pew in any church or place of public worship
- Lot in a burial ground
- Family clothing
- Sewing machines
- Wages
- 85% of wages for labor or services
- Tools of the Trade
- $15,000 in tools of the trade, which must include any vehicle used for work
- Insurance
- Life insurance proceeds
- Group life insurance policies
- Pensions and retirement
- IRAs and other retirement plans
- Annuity contracts
- State employee pensions
- Police and volunteer firefighter pensions
- Public benefits
- Unemployment
- Workers’ compensation
- Public assistance
- Social security
- Veteran’s benefits
- Wildcard
- $500 in personal property for “head of household”
Do You Qualify for Bankruptcy?
According to the courts, the Bankruptcy Code aims to provide qualified filers with a fresh financial start. Many times, declaring bankruptcy and starting again are the only options available to those who want to rehabilitate their credit and achieve their financial objectives.
Numerous debts, such as credit card debt, unsecured loans, medical expenses, car repossessions, and judgments, might be eliminated through bankruptcy. Additionally, some debts, like school loans, taxes, unpaid child support, and fines, cannot be discharged through bankruptcy. To find out if bankruptcy is the best option, speak with an expert bankruptcy attorney.
How Can Bankruptcy Safeguard Me?
When you file a Chapter 7 or Chapter 13 lawsuit, a halt to collection activities is immediately implemented. This implies that if any of your creditors who were informed of your bankruptcy filing still try to collect from you, they are breaking the law and could face repercussions.
The automatic stay remains in effect throughout your case or until the creditor is successful in getting the Bankruptcy Court’s approval to resume collection attempts, whichever comes first. The automatic stay aids individuals in stopping foreclosure proceedings and sheriff sales, halting repossessions or recovering property that has been seized, ceasing harassing phone calls, and ceasing onerous mail-order bills.
Additionally, suppose you are successful in getting a bankruptcy discharge. In that case, an injunction is put in place that prevents the same creditors from continuing to pursue payment after your case is over. A creditor will face legal repercussions if they make an effort to collect discharged debts.
Chapter 7
Chapter 7 is an extremely quick liquidation bankruptcy. Most of the debts, including credit card and loan debts, that are generating stress and distress in the lives of debtors will be eliminated if they petition under Chapter 7 and are successful in getting a discharge. You must satisfy income, expenses, and assets requirements to be eligible for a Chapter 7 bankruptcy.
Additionally, to be eligible for Chapter 7, you cannot have gotten a Chapter 7 or Chapter 13 discharge within the previous 8 or 4 years, respectively.
Will I Lose All of My Assets if I File for Chapter 7 Bankruptcy?
No. It is a prevalent fallacy that people filing for bankruptcy under Chapter 7 would lose everything, making it one of the most often asked questions by individuals considering filing. People who file under Chapter 7 are given exemptions to protect the value of their assets, even though the bankruptcy statute mandates that a Chapter 7 trustee must liquidate a filer’s assets.
Most Chapter 7 filers discover that their assets are protected by these exemptions and may be kept.
However, if you are not current on your payments, a Chapter 7 petition won’t help you protect assets that are secured by loans, such as a house or a car. If you fail to pay those creditors, they will still be able to use the collateral to recoup their losses.
What’s the Process for the Wildcard Exemption?
The debtor may invoke the wildcard exemption to protect any personal property. The limitation on the debtor’s ability to save is $500.
Who May File an Exemption in Bankruptcy?
Anyone who declares bankruptcy is eligible to request bankruptcy exemptions. Both Chapter 7 and Chapter 13 bankruptcy files are eligible for these exemptions, although the specific exemptions that may be requested differ. Make an inventory of your possessions and note their replacement values to calculate what property you will be allowed to keep if you file for Chapter 7 bankruptcy.
What Is an Exemption Limit for Bankruptcy?
Any equity you have in a piece of property is subject to an exemption limit, which restricts how much equity is exempt. Equity is the difference between a property’s fair market value and any outstanding debt. A home with a loan of $450,000 and a valuation of $500,000, for instance, have equity worth $50,000. The debtor would not be required to sell the $50,000 worth of equity in the home to settle the obligations if the state’s homestead exemption was $50,000 or more.
Depending on where you live, other things could have an impact on what your limit is. In some areas, marriage may allow couples to increase their exemption amounts. Some exemption amounts may also increase if you file as the “head of household” or if you have several dependents.
Senior citizens may be eligible for higher homestead, personal property, or other exemption limits in some states. Your exemption threshold may be increased by a disability, particularly for motor vehicles.
Do I Need a Bankruptcy Attorney?
Consumer bankruptcy can be a challenging procedure to handle on your own. For those who qualify, declaring bankruptcy can help them start over and get rid of their debt.
Consult a Delaware bankruptcy attorney for advice on state law and to assist you to keep some of your property and other assets if you are contemplating filing for bankruptcy in Delaware and have questions about how to proceed with the procedure.
