Understanding Exempt Assets (Bankruptcy): What You Need to Know
Definition & Meaning
Exempt assets in the context of bankruptcy refer to properties that a debtor is allowed to retain during bankruptcy proceedings. These assets are protected from creditors who do not have a lien on them, meaning creditors cannot claim these properties to satisfy debts. Both federal and state laws define what qualifies as exempt assets, and it is essential for debtors to list these assets in their financial statements and schedules.
Legal Use & context
Exempt assets are primarily relevant in bankruptcy law, which falls under federal and state jurisdictions. They are crucial for individuals filing for bankruptcy as they determine what property can be kept. Users can manage their bankruptcy filings and related forms using resources like US Legal Forms, which provide templates created by legal professionals.
Real-world examples
Here are a couple of examples of abatement:
For instance, under federal law, a married couple filing jointly can exempt up to $32,300 of their homestead value. If their home is valued at $70,000 with a $25,000 mortgage, creditors can only claim $12,700, which is the equity minus the exemption limit.
(Hypothetical example) A single individual with a car valued at $15,000 and a loan of $10,000 may exempt the vehicle if the state allows for a vehicle exemption of $5,000.
Relevant laws & statutes
Key statutes governing exempt assets include:
- Bankruptcy Code (Title 11 of the United States Code)
- State-specific bankruptcy exemption laws