In Bankruptcy Information, Filing pro se

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Schedule C, exempt property, is one of the most important schedules from the debtor’s perspective. This is where the debtor lists all property in which he claims an exemption. It is the debtor’s responsibility to claim all applicable exemptions. Even if a law clearly exempts property, if the property isn’t listed on Schedule C, the trustee can seize it.

Schedule C is straightforward and easy to fill out. You simply list the property that you claim as exempt, the value of the property, the value of the exemption and the basis for claiming the exemption. The trick is in knowing which property is exempt and what statute provides the exemption.

The exemption scheme in bankruptcy is complicated and convoluted. The Bankruptcy Code provides exemptions but also allows states to “opt out” of the federal exemptions and force debtors to use the exemptions available under state law. Utah is an opt-out state. Furthermore, the debtor might have to decide among two different states’ exemptions or the federal exemptions, depending on how long she has lived in the state in which she’s filing. Recall that the proper state for filing is determined by where a debtor has lived for the longest portion of the last 180 days. However, just because the debtor can file in that state doesn’t mean that the exemptions of that state are available to the debtor.

Exemptions in states that have opted out of the federal exemptions are determined by the debtor’s domicile for the 730 days (two years) preceding filing. If the debtor hasn’t lived in the same state for 730 days immediately preceding filing, exemptions are determined by where the debtor lived for the 180 days (or the greater portion of the 180 days) immediately preceding the 730-day period. The effect of this is to force a debtor to have lived in a state for two years before she can claim that state’s exemptions. This was done to prevent debtors from moving to states with more liberal exemption laws and then immediately filing bankruptcy.

Sometimes this has weird results. For example, suppose a debtor has not lived in Utah for the past 730 days but has lived here long enough to make Utah the proper place to file. Utah’s exemptions are not available to the debtor. Suppose further that the debtor lived in Wisconsin for the 180 days immediately preceding the 730 day period but before that lived in another state. Under the Bankruptcy Code, the debtor would use Wisconsin’s exemptions. But now suppose that Wisconsin does not allow a person to claim the benefits of its state exemptions unless the person has lived there for at least one year. As a result, the debtor can claim neither Utah’s nor Wisconsin’s exemptions. In a case where no state exemptions are available to the debtor, she is entitled to claim the federal exemptions, even if the state in which she is filing has opted out of the federal exemption scheme, as Utah has done.

Utah has several statutes under which property can be claimed as exempt. The main exemptions are found in Utah’s Exemptions Act. Some exemptions are absolute and do not depend on the value of the property claimed as exempt. Others are limited to a certain value. For example, a debtor can claim an exemption of $3,000 in a motor vehicle. Any equity above that can be seized by the trustee and sold. There are other state exemptions besides those in the Utah Exemptions Act. Additionally, even though Utah has opted out of the federal exemptions of Section 522(d) of the Bankruptcy Code, other federal exemptions might apply. If you have property of value that isn’t covered by the exemptions listed in the Utah Exemptions Act, you need to do some research to see if there are other exemptions that apply.

Exemptions and exemption planning are critical to the debtor’s interests. Without proper exemptions the debtor could end up losing thousands of dollars of property that she could otherwise keep, If you have any questions about exemptions or exemption planning, please contact us.

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