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Law Offices of Stephen Orchard Law Offices of Stephen Orchard

Will I Lose All My Stuff if I File Bankruptcy?


There is a common misconception that when you file for bankruptcy, you lose all your stuff. The bankruptcy court comes in, sweeps through your home, and you are left with four walls, a roof, floor and an empty home. In fact, nothing could be farther from the truth.

The entire concept of bankruptcy is to give people who file a “fresh start.” The law recognizes that taking everything someone owns would hardly be a “fresh start.” That’s why bankruptcy law provides exemptions.

What are Exemptions?

Exemptions are protections for certain categories and values of property that the bankruptcy court cannot take, no matter how much you owe, and no matter how much debt you are discharging.

Think of exemptions as a giant metaphorical cup. Whatever property you can fit in that cup, you keep. Anything that runs over you could lose (at least in a chapter 7 bankruptcy; chapter 13 does allow you to keep property that exceeds exemptions).

There are many exemptions for varying kinds of property. But let’s take a look at some commonly used exemptions here:

Your Home – As a general rule, your home is protected from bankruptcy, no matter what it’s value. There are certain rules and restrictions, which is why you should speak to a bankruptcy attorney before you file, but as a general rule, the equity in your home is protected. In fact, Florida has one of the strongest bankruptcy protections in the country for people’s homestead.

The property does have to be your home to get the protection. Investment property, vacation homes, or second homes will not get the protection in the exemption.

Your Vehicle – Up to $1,000 can be protected for a car. This is $1,000 in equity. If you have a $60,000 car and you owe $59,000 on it, the remaining equity–$1,000—fits in the exemption limit, and you keep the vehicle. Even if you have a vehicle that is slightly over the exemption limit—say, it is worth $1,300—in many cases the bankruptcy court will not take the vehicle.

Personal Property – If you have no homestead, you can keep up to $4,000 in property. If you do have a homestead, you get $1,000 in property that is exempt. This means if all of your personal property adds up to a sum less than the exemption amount, it is protected.

While these numbers may not seem like a lot, in reality, most of your property is not worth what you think it is. The bankruptcy court usually isn’t interested in taking your socks and your spoons and your four-year-old Xbox.

Retirement Accounts – Many retirement accounts, and even in some cases annuities, are protected. This includes 401(k)s, IRAs, or Roth IRAs.

Do you need help with filing for bankruptcy? We can help you plan your bankruptcy, and answer any questions you may have. Contact a Boca Raton bankruptcy attorney at the Law Offices of Stephen Orchard at 561-455-7961 for a consultation today.

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