Many people hesitate to file for bankruptcy because they worry, “What property will I lose if I file for bankruptcy?” The property you can keep will depend on which type of bankruptcy you file and whether you are located in Arkansas or Oklahoma.
Each state has its own list of bankruptcy exemptions for property that cannot be taken from you by the trustee to be sold in a Chapter 7 bankruptcy case. If you have non-exempt property, you might lose it in a Chapter 7 case. It’s possible to save more property by filing for protection under Chapter 13 bankruptcy.
What Property Will I Lose If I File for Bankruptcy?
In Chapter 7 bankruptcy, state and federal exemptions are available for property. In Arkansas, you can choose either the federal exemptions or those allowed under state law, but you cannot choose both. Oklahoma mandates that you select the state exemptions if you file for Chapter 7 bankruptcy. If you file for Chapter 13 bankruptcy instead, your property exemptions are handled differently.
Under Chapter 13, you enter into a repayment plan to repay a portion of your debts over a period lasting from a minimum of three years to five years. Since you are repaying your creditors under Chapter 13, your property is not liquidated.
Secured debts are also handled differently under both Chapter 13 and Chapter 7. Property such as your home or your car that has secured mortgages or auto loans may be lost if you do not continue making your payments.
Bankruptcy does not destroy secured interests. However, if you have fallen behind on your mortgage payments and are in danger of foreclosure, filing for Chapter 13 bankruptcy might allow you more time to catch up on your payments, but you will need to continue making your regular mortgage payments during the repayment period.
What Property Will I Lose If I File for Bankruptcy in Arkansas?
In Arkansas, you can choose either federal or state property exemptions. Under the federal exemptions, you can exempt up to $23,675 of equity in your home.
Equity is not the home’s market value but the amount of equity built up. For example, if you have a $100,000 mortgage and owe $80,000, you can exempt the $20,000 of equity you have. If you have more equity built up in your home than the exemption amount, you can either pay the difference to your creditors or potentially lose your home.
Under the state exemptions, you can exempt a home in urban areas if it sits on a lot of 1/4 acre or less and a home in rural areas if it sits on 80 acres or less. The Arkansas homestead exemption is not available for larger properties.
The federal exemption for personal property is much higher than the exemption under Arkansas laws. Arkansas has a personal property exemption of just $200, excluding clothing.
Under federal law, you can protect up to $3,775 in your vehicle, $1,600 of jewelry, $12,625 for household items, $2,375 for tools needed for your trade, and $12,625 in loan value or interest in a life insurance policy.
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In Arkansas, public benefits from disability, workers’ compensation, or unemployment compensation are not included in your bankruptcy estate and are not considered income under Chapter 13.
Money received for a personal injury is protected under the federal exemptions up to $23,675, except for money recovered for pain and suffering or pecuniary losses.
Under Arkansas exemptions, your IRA is protected up to $20,000. Federal exemptions allow for fully exempt retirement counts and a wildcard exemption of $1,250 plus up to $11,850 of any portion of your homestead exemption not used.
What Property Will I Lose If I File for Bankruptcy in Oklahoma?
Oklahoma requires that you take state exemptions when filing for Chapter 7 bankruptcy. You cannot choose federal exemptions. In Oklahoma, the following exemptions are available:
- Unlimited exemption for your residence located on a lot of up to one acre in an urban area or up to 160 acres in a rural area
- Full exemption for many types of personal property
- Up to $4,000 worth of clothing
- Guns up to $2,000 for household uses
- Personal injury recoveries up to $50,000
- Wedding rings up to $3,000
- Motor vehicles up to $7,500 of equity
- Tax-exempt retirement accounts are fully exempt
- IRAs and Roth IRAs up to $1,283,025
- Public benefits
- Tools needed for your trade up to $10,000
- Many types of life insurance benefits
- Miscellaneous exemptions
Contact the Law Offices of Craig L. Cook Today
What property will I lose if I file for bankruptcy? It’s important to talk to an experienced bankruptcy attorney at the Law Offices of Craig L. Cook to determine what property will be exempt. To keep more of your property, you might want to discuss filing for Chapter 13 bankruptcy.
In most cases, people who file for Chapter 7 bankruptcy have more exempt property than they realize and lose very little. To learn more, contact us today to schedule your free consultation.
