Exemptions Allowed In Chapter 13 Bankruptcy

Many people want to know what are the exemptions allowed in chapter 13 bankruptcy? The answer is none!

The question stems from confusion about bankruptcy. While there are actually five types of bankruptcy, there are two types of personal bankruptcy - Chapter 7 bankruptcy and Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is called a liquidation bankruptcy. In a Chapter 7, a bankruptcy trustee will sell the debtor's property that has value and that is not exempt. The money received is then paid to the debtor's creditors.

Because, bankruptcy was created to give people a fresh start, it would not make sense to permit a bankruptcy trustee to take all of a person's property and sell it. Also, people need basic items such as clothing, furniture, household items, cars, tools of their trade, etc. The way that the bankruptcy laws were set up to allow people to keep certain property was to allow people to "exempt" certain property from the bankruptcy. Bankruptcy trustees cannot sell the "exempt" property meaning that the "exempt" property remains the property of the debtor.

As a side note, federal law creates property exemptions and allows states to create their own exemptions. Many states have taken advantage of the opportunity to create exemptions. Therefore, in most cases, the bankruptcy property exemptions are actually controlled by state law and not federal law.

A Chapter 13 bankruptcy is different from a Chapter 7 bankruptcy. Chapter 13 of the bankruptcy code is titled "Individual Debt Adjustment". Basically, this is a bankruptcy court ordered debt payment plan. In a Chapter 13 bankruptcy, a debtor makes monthly payments to the bankruptcy trustee who then pays the money to the debtor's creditors according to the debtor's payment plan.

Unlike a Chapter 7 bankruptcy, in a Chapter 13 bankruptcy the bankruptcy trustee does not take any property and sell it. Because the trustee does not take or sell property, there is not a need for the debtor to exempt any property from a Chapter 13 bankruptcy. So, there are not any property exemptions allowed in chapter 13 bankruptcy.

This is general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

For more general information, see Bankruptcy. For more detailed information see Chapter 13 bankruptcy.

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