Bankruptcy Chapter 7 Exemptions
How to claim exempt property in Chapter 7 cases without turn-over
Each debtor filing Chapter 7 may designate property as exempt, so long as specific statutory authority allows inclusion. Claiming property properly prevents turn-over to the trustee for distribution. Any asset that is not covered by the bankruptcy Chapter 7 exemption list may be lost to seizure, subject to the discretion of the trustee. In practice, few trustees show interest in inconsequential items for personal or household use. Yet as value increases, the cost of seizure, accounting and distribution will eventually reach a point of efficiency, so that a trustee should in good faith require turn-over of non-exempt property and provide creditors with net proceeds.
How to claim Chapter 7 exemptions
All debtors must file official forms and schedules in connection with each case. Included within the Chapter 7 forms, Claim Form H is designed for designation of exempt property. Each item claimed must be listed separately with a corresponding cite to an appropriate statute that permits inclusion. In a few states, either the federal Chapter 7 exemptions or the state Chapter 7 exemptions may be claimed, so long as all claimed exemptions are from the same legislative authority. Debtors may not choose randomly from both state and federal statutes. Also be aware that proper classification of individual items of property is essential to maintain an exemption integrity, and avoid motions objecting to property retained.
To claim the maximum value of exempt categories, many debtors attempt to undervalue individual items. In practice, garage sale prices are typically allowed for household items, so long as valuation does not drop to an indefensible liquidation value.