As Arkansas Bankruptcy Lawyers, we know that the Bankruptcy Exemption rules are very important to anyone considering filing for Bankruptcy protection. The Exemption Rules protect certain items of property from the Chapter 7 Trustee’s ability to take and sell it to pay your debt. Also, it keeps the Chapter 13 Trustee from requiring a debtor to pay the property’s equity into a Plan of Reorganization.
The vast majority of people our Firm represents in Bankruptcy can fit all their property into an Exemption. On the rare occasion that all the property cannot be exempted, there are ways to protect that property that our would discuss with you in that event.
If your residence has been in Arkansas, continuously, for two (2) years or more, you are allowed to elect either the Arkansas Constitutional Exemptions or the Federal Exemptions, no mixing between the two are allowed. Usually the Federal Exemptions are best to use, unless you have substantial equity in your home. The provisions of both are discussed below.
A. Arkansas Constitutional Exemptions. You may exempt your homestead, regardless of value, if you are married or have dependants, subject to acreage restrictions. The acreage restrictions are: one quarter (1/4), of an acre for urban property and eighty (80) acres for rural property. Additionally, you may exempt your clothes, and up to $500 of any other personal property if you are married or have dependants or $200 if single with no dependants. If two spouses are filing, the exemptions would be $500 each plus your homestead, plus your clothing.
B. Federal Exemptions. The Federal Exemptions have a list of categories of property that can be exempted and a value limitation for each item of property. One important point about the Federal Exemptions is, if you and your spouse are both filing you may double the exemptions; in other words, if an exemption is $100, and, you and your spouse are filing, the combined exemption is $200. The Federal Exemptions are as follows:
- Homestead: $20,200, for single or $40,400 for joint filing in real property or personal property used as residence, can also be used towards a burial plot.
- Motor Vehicle: $3,225 in one motor vehicle per person.
- Personal Property: $1,075 for “any particular item” and $10,775 of household furnishings, household goods, wearing apparel, appliances, books, animals, crops or musical instruments for household use.
- Jewelry: $1,350 (per person) for jewelry.
- Wildcard: $1,075 for any property plus up to $10,775 of any unused portion of the homestead exemption (per person).
- Work Items: $2,025 in implements, professional books, tools, tools of the trade.
- Unmatured Life Insurance: any unmatured life insurance contract owned by debtor.
- Any Interest in Any Unmatured Life Insurance Contract: $10,775.
- Health Aids: any professional prescribed health aids.
- Subsistence Payments: exempt any of the debtor’s right to receive: (A) Social Security, unemployment, public assistance; (B) VA benefits; (C) disability, illness, unemployment benefit; (D) alimony, support or separate maintenance to the extent reasonably necessary for the support of debtor; (E) payment under stock bonus, pension, profit sharing, annuity or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of debtor or his dependants.
- Right to Receive Property Traceable to: (A) crime victim’s reparation; (B) wrongful death of individual whom debtor was dependent; (C) payment under life insurance of an individual whom debtor was dependent; (D) $20,200 on account of bodily injury, not to include pain and suffering or compensation for actual pecuniary loss; (E) compensation of loss of future earnings of debtor, to the extent reasonably necessary for the support of debtor or his dependants.
- Retirement Funds Exempt from Taxation: unlimited.
If you have not been a resident of Arkansas continuously for the past two (2) years, which state’s exemption scheme applies in your situation is complex. The question is, which state did you live in the most during the 6 months before the 2 years before filing Bankruptcy? Therefore, you go back 2 1/2 years then come forward to 2 years. You then figure out which state you lived in the most during that 6 month period, and what ever state you lived in the most is the state that will control your exemption scheme.
After determining which State’s Exemptions applies, you must figure out several other things, which is beyond the scope of this writing, before you know exactly what exemptions you have. Of course our experienced Bankruptcy Lawyers know how to make the calculations and determine exactly what exemptions apply to your situation.
View the link above to found about more about the dischargeable debts during Chapter 7 Bankruptcy.
The Bankruptcy rules say that certain debts are non-dischargeable and will still be owed after going through the Bankruptcy process, unless it is paid through the Bankruptcy process. The most common non-dischargeable debts are as follows:
- Taxes, with limited exceptions;
- Alimony, maintenance or support (also child support);
- Criminal fines, tickets, criminal hot checks or restitution;
- Damage resulting from driving while intoxicated;
- Some property-debt division Orders in a divorce;
- Some debt incurred within ninety (90) days of the date of filing a Chapter 7;
- Student loans guaranteed by the Government, with limited exception (undue hardship);
- Debt obtained by fraud.
Criminal Fines, Tickets, Hot Checks
Bankruptcy does not affect Criminal Fines, Restitution, Tickets or Criminal Hot Checks. You must comply with whatever the criminal justice system requires you to do. Filing Bankruptcy will not stop any of the Criminal Court’s orders.