When a bankruptcy case is filed, a document titled Schedule C is filed which shows what the debtor has designated as exempt property. By exempt, the debtor is advising the court and the trustee that this property is protected from seizure pursuant to the Georgia exemptions law, codified by O.C.G.A. (Official Code of Georgia Annotated) 44-13-100. It should also be noted that when the bankruptcy laws were rewritten back in 1978, the revisions provided that each state could allow debtors to use the federal exemptions or the state could create its own exemption statutes. Georgia decided to opt out of the federal exemption laws and created its own. As stated above, O.C.G.A. 44-13-100 is the section of the Georgia statutes that addresses exemption of property in a bankruptcy case. This section of the Georgia statutes allows the debtor to exempt a certain dollar amount of value in his property. On Schedule B, a debtor must list the aggregate value of all his household goods and furnishings. Let’s say a debtor declares that all of the property inside of his house is worth $4,500. This amount is the estimate of what the debtor believes it would cost him to replace that property. O.C.G.A. 44-13-100(a)(4) provides that a debtor may exempt up to $5,000 in total value of household goods and furnishings for purposes of bankruptcy. Therefore, the $4,500 of value of household goods that the debtor listed in our hypothetical would be totally exempt from the case. A trustee in a chapter 7 bankruptcy case would then have no legal right to the household goods for inclusion in the bankruptcy estate. If we look at another hypothetical example, here regarding a home, if the debtor claims that its fair market value is $100,000 and he owes $90,000 on his mortgage, the equity in that home is equal to $10,000. Under O.C.G.A. 44-13-100(a)(1), the debtor can exempt all of that equity and keep his home, even though he filed bankruptcy. Now if you have a debtor whose equity exceeds $10,000, he may or may not be able to protect his home from being seized by a chapter 7 trustee. His home might be protected but it really depends on how much of the equity exceeds the $10,000 limit. If the amount adds up to maybe $5,000 or so, then under most circumstances, the debtor’s property will still be protected because the $5,000 would most likely have to be spent to sell the house and therefore generate no funds for creditors. A trustee under this type of situation will probably abandon any interest he may have in the property. Conversely, when a debtor has equity in real property that exceeds the exemption limits by say $10,000 or $20,000 and wants to file bankruptcy, he will most likely have to file a Chapter 13 case. If a Chapter 13 case is filed, the amount of equity over the $10,000 limit will be used to calculate how much money the debtor will be required to pay his unsecured creditors. Please note that all of the above information is for those residing in Georgia. If you reside in a state other than Georgia, I advise you to check your state’s laws regarding bankruptcy exemptions.
Chapter 7 Bankruptcy Attorney