When you file for bankruptcy as an individual, the most basic explanation for the way the process works is that you empty your pockets and dump everything you own out on the floor at the moment of bankruptcy. A line of vultures (I mean creditors) gathers round licking their lips and hoping to get their hands on your goods (or the money that your stuff is worth once someone sells it). The trustee, a person working for the "system" and making sure it works right, uses your input to send some of the creditors home and to sort the order the others stand in in the line to get paid. The trustee also tells you which of the stuff you've dumped on the floor you get to keep in order to start life over again (e.g. clothing, your wedding ring, your bed, your kitchen table, etc.). These are exempt assets, and the stuff that's on that list varies from state to state. It is widely variable and, I think, fun to look at these things -- you get a sense of the state from what the legislators decided to exempt. In Texas and Florida, for example, you get to keep your house, no matter how valuable it is. In Maine you get to keep up to $35,000 in your homestead, but if it's worth more than that you may need to sell it and give the money beyond $35K to your creditors. In Maine, though, you get to keep your fishing boat, no matter what it's worth, as long as it's less than 5 tons.
New Hampshire's exemptions tell you a little about what was considered absolutely necessary for debtors to begin life afresh at the time the statute was written in that rural, Puritan state. I like that you get to keep your interest in a pew at any meetinghouse at which your family regularly worships. Plus up to six sheep and the fleeces of the same. But New Hampshire only lets you keep a car worth $4,000. Maine lets you keep a clunker worth up to $5,000. Anything fancier than that you'll have to sell, and fork over the cash to the trustee for the benefit of your creditors. But you get to keep your cemetary plot in NH, which Maine does not exempt.
The exemption statutes can be very interesting and either outdated or merely unfriendly to the debtor. For example, in NY, the homestead exemption is a princely $10k. A debtor in bankruptcy can exempt a car of up to $2400. And a debtor can exempt a $35 watch. Very generous.
Posted by: Andrew | March 23, 2004 at 03:31 PM
In Pennsylvania there is NO homestead exemption, none, nadda. But you do get to keep your bible so you can worship Christ on the streets. Oh, and we have a whopping $300 wildcard exemption you can apply to anything, and I mean like, ANYTHING! That's a really cool provision, I think.
As you can imagine, we all opt for the federal exemptions here.
Posted by: Richard Ames | March 23, 2004 at 06:52 PM
Hey, you can also keep one radio (no tv) in New York, and $200 worth of work tools. No federal option is allowed.
Posted by: David Giacalone | March 23, 2004 at 09:59 PM
In Maryland, no Homestead exemption, a $5,500 Wildcard and no ability to opt for the Federal package... but you get to keep your burial plot or crypt.
Posted by: Scott | March 24, 2004 at 01:50 AM