Schedule C could be the most important schedule a debtor can complete. Schedule C is the list of property the debtor claims as exempt, and it could determine what you can keep and what you can lose in bankruptcy.
What are exemptions?
Exempt property is property that is not available (exempt) from creditors’ claims. Each state has various laws that allow a person to keep some of his property safe from the claims of creditors. These are called exemption laws
In bankruptcy there are two exemption provisions. The first is exemptions allowed under the Bankruptcy Code. These are available to anyone regardless of what state they file in, unless their state has chosen the second provisions. The second is those exemptions allowed under the laws of the state where the debtor resides. The Bankruptcy Code leaves it up to each state which of these the state uses. If a state elects to use its own exemption laws and not those provided by the Bankruptcy Code, the state is said to have opted out, meaning it has chosen not to allow the federal exemptions for its residents. Utah is an opt-out state. That means the exemptions available to debtors filing bankruptcy in Utah are those allowed by Utah law. The federal exemptions are not available to Utahns filing bankruptcy. That’s too bad because by and large the federal exemptions are more generous than Utah’s exemptions.
Exemptions in Utah.
Homestead. A homestead exemption exists in real property that is used as the debtor’s residence. A debtor is entitled to an exemption of $42,500 as a homestead exemption. A spouse who is also filing bankruptcy is likewise entitled to a $42,500 homestead exemption, meaning that together spouses can exempt $85,000 in the value of their home.
Personal property. Most of Utah’s personal property exemptions are found in two statutes in the Utah Exemptions Act, which can be found at Utah Code Section 78B-5-505 and 506. Section 505 exempts certain property regardless of its value while Section 506 exempts other property up to a certain value.
Section 505 property. Property under Section 505 that is exempt regardless of value includes
(i) a burial plot for the individual and the individual’s family;
(ii) health aids reasonably necessary to enable the individual or a dependent to work or sustain health;
(iii) benefits that the individual or the individual’s dependent have received or are entitled to receive from any source because of:
(B) illness; or
(iv) benefits paid or payable for medical, surgical, or hospital care to the extent that the benefits are used by an individual or the individual’s dependent to pay for that care;
(v) veterans’ benefits;
(vi) money or property received, and rights to receive money or property for child support;
(vii) money or property received, and rights to receive money or property for alimony or separate maintenance, to the extent reasonably necessary for the support of the individual and the individual’s dependents;
(I) clothes washer and dryer;
(V) microwave oven; and
(VI) sewing machine;
(B) all carpets in use;
(C) provisions sufficient for 12 months actually provided for individual or family use;
(D) all wearing apparel of every individual and dependent, not including jewelry or furs; and
(E) all beds and bedding for every individual or dependent;
(ix) except for works of art held by the debtor as part of a trade or business, works of art:
(A) depicting the debtor or the debtor and the debtor’s resident family; or
(B) produced by the debtor or the debtor and the debtor’s resident family;
(x) proceeds of insurance, a judgment, or a settlement, or other rights accruing as a result of bodily injury of the individual or of the wrongful death or bodily injury of another individual of whom the individual was or is a dependent to the extent that those proceeds are compensatory;
(xi) the proceeds or benefits of any life insurance contracts or policies paid or payable to the debtor or any trust of which the debtor is a beneficiary upon the death of the spouse or children of the debtor, provided that the contract or policy has been owned by the debtor for a continuous unexpired period of one year;
(xii) the proceeds or benefits of any life insurance contracts or policies paid or payable to the spouse or children of the debtor or any trust of which the spouse or children are beneficiaries upon the death of the debtor, provided that the contract or policy has been in existence for a continuous unexpired period of one year;
(xiii) proceeds and avails of any unmatured life insurance contracts owned by the debtor or any revocable grantor trust created by the debtor, excluding any payments made on the contract during the one year immediately preceding a creditor’s levy or execution;
(xiv) except as provided in Subsection (1)(b), and except for a judgment described in Subsection 75-7-503(2)(c), any money or other assets held for or payable to the individual as an owner, participant, or beneficiary from or an interest of the individual as an owner, participant, or beneficiary in a fund or account, including an inherited fund or account, in a retirement plan or arrangement that is described in Section 401(a), 401(h), 401(k), 403(a), 403(b), 408, 408A, 409, 414(d), 414(e), or 457, Internal Revenue Code, including an owner’s, a participant’s, or a beneficiary’s interest that arises by inheritance, designation, appointment, or otherwise;
(xv) the interest of or any money or other assets payable to an alternate payee under a qualified domestic relations order as those terms are defined in Section 414(p), Internal Revenue Code;
(xvi) unpaid earnings of the household of the filing individual due as of the date of the filing of a bankruptcy petition in the amount of 1/24 of the Utah State annual median family income for the household size of the filing individual as determined by the Utah State Annual Median Family Income reported by the United States Census Bureau and as adjusted based upon the Consumer Price Index for All Urban Consumers for an individual whose unpaid earnings are paid more often than once a month or, if unpaid earnings are not paid more often than once a month, then in the amount of 1/12 of the Utah State annual median family income for the household size of the individual as determined by the Utah State Annual Median Family Income reported by the United States Census Bureau and as adjusted based upon the Consumer Price Index for All Urban Consumers;
(xvii) except for curio or relic firearms, as defined in Section 76-10-501, any three of the following:
(A) one handgun and ammunition for the handgun not exceeding 1,000 rounds;
(B) one shotgun and ammunition for the shotgun not exceeding 1,000 rounds; and
(C) one shoulder arm and ammunition for the shoulder arm not exceeding 1,000 rounds; and
(xviii) money, not exceeding $200,000, in the aggregate, that an individual deposits, more than 18 months before the day on which the individual files a petition for bankruptcy or an action is filed by a creditor against the individual, as applicable, in all tax-advantaged accounts for saving for higher education costs on behalf of a particular individual that meets the requirements of Section 529, Internal Revenue Code.
(i) Any money, asset, or other interest in a fund or account that is exempt from a claim of a creditor of the owner, beneficiary, or participant under Subsection (1)(a)(xiv) does not cease to be exempt after the owner’s, participant’s, or beneficiary’s death by reason of a direct transfer or eligible rollover to an inherited individual retirement account as defined in Section 408(d)(3), Internal Revenue Code.
(ii) Subsections (1)(a)(xiv) and (1)(b)(i) apply to all inherited individual retirement accounts without regard to the date on which the account was created.
Section 506 lists property that is exempt up to a certain value, and includes:
(1) An individual is entitled to exemption of the following property up to an aggregate value of items in each subsection of $1,000:
(a) sofas, chairs, and related furnishings reasonably necessary for one household;
(b) dining and kitchen tables and chairs reasonably necessary for one household;
(c) animals, books, and musical instruments, if reasonably held for the personal use of the individual or the individual’s dependents; and
(d) heirlooms or other items of particular sentimental value to the individual.
(2) An individual is entitled to an exemption, not exceeding $5,000 in aggregate value, of implements, professional books, or tools of the individual’s trade, including motor vehicles to which no other exemption has been applied, and that are actually used by the individual in the individual’s principal business, trade, or profession.
(a) As used in this Subsection (3), “motor vehicle” does not include any motor vehicle designed for or used primarily for recreational purposes, such as:
(i) an off-highway vehicle as defined in Section 41-22-2, except a motorcycle the individual regularly uses for daily transportation; or
(ii) a recreational vehicle as defined in Section 13-14-102, except a van the individual regularly uses for daily transportation.
(b) An individual is entitled to an exemption, not exceeding $3,000 in value, of one motor vehicle.
(4) This section does not affect property exempt under Section 78B-5-505.
How to Claim Exemptions
There are four columns on Schedule C. The first is for a brief description of the property. Whatever is listed on Schedule C must appear on either Schedule A or Schedule B and it should be described the same way on both schedules. The next column is for the value of the property owned by the debtor. We’ve talked about valuing property that is jointly owned. On Schedule C, only list the value of the debtor’s interest, not the full value of the property if it is jointly owned. The third column is the amount of the exemption the debtor claims. If the property is a type listed in Section 505, where there is no limit, the exemption amount will be the same as the value of the property. For example, if a washer and dryer are valued on Schedule B at $250, the amount of the exemption on Schedule C will be $250. On the other hand, a motor vehicle is limited to an exemption of $3,000. If the debtor lists a motor vehicle as worth $5,000 on Schedule B, she may only claim an exemption of $3,000 on Schedule C. This leaves $2,000 in value as unprotected. We talked about calculating equity that might be at risk here.
WARNING. The Utah Exemptions Act doesn’t list all the exemptions a person might be entitled to. For example, workman’s compensation awards are exempted under a different statute. It’s up to the debtor to claim all the exemptions to which she believes she is entitled. If an exemption isn’t claimed, the court will not allow it even if it’s clear an exemption exists.
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