Filing Chapter 7 bankruptcy impacts your property, including any cash you may have in the bank. You can keep any property that is exempt under bankruptcy laws. For example, there is an exemption for vehicles up to a certain value. There is a tools of trade exemption. There is even an exemption for your house.
However, cash in the bank is a different story. In most situations, there is no specific exemption that allows you to keep the money you have in the bank once you have filed bankruptcy.
703 v. 704 Exemptions
During a Chapter 7 bankruptcy, you can either choose the 703 exemptions or the 704 exemptions. The main difference between these two categories of exemptions is the amount of exemption for your home.
Under the 703 exemptions, you are allowed a smaller ($26,925) exemption for your home. But you can use the exemption for any type of property. For instance, if you don’t actually own a house, you are still able to apply the exemption to any other property you may have. This is why a 703 exemption is referred to as the “Wild Card” exemption.
The 704 exemptions allow for a larger home exemption. It allows an exemption of $75,000 if you live alone, $100,000 if you live with a family member, or $175,000 if you are over 65 years old. However, under this category, you can only use this exemption for a home. If your home does not have any equity, 704 exemptions is not worth anything for you in a Chapter 7 bankruptcy.
Exemptions and Cash In the Bank
If you have cash in the bank, the 703 exemptions may protect this liquid asset. You can use the $26,925 Wild Card exemption to protect your cash. However, you or your Central Valley BK attorney must make sure that you have not used the Wild Card exemption to protect anything else.
In most situations, 704 exemptions will not protect your cash in the bank. The trustee will most likely take your cash. As such, if you are going to choose this exemption, you should spend any cash you have in the bank before filing Chapter 7 bankruptcy.
Call an Experienced Central Valley Bankruptcy Attorney
Have you already filed for bankruptcy or are planning to file for bankruptcy? If so, it may be in your best interest to immediately consult with an experienced bankruptcy attorney to help you determine what is in your best interest.