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What are Exemptions?

Debtors are entitled to protect their equity in certain property, known as “assets,” from becoming part of your bankruptcy estate, and will not be used to pay creditors through your bankruptcy case.  The types and how much of this property is exempt is determined by federal law (the Bankruptcy Code) or state law.  Note that if the unsecured value of an asset exceeds the value of your exemption, then it can be sold by the trustee and only the exempt amount returned to you.

Additionally, if an item is otherwise exempt, it does not eliminate the interests of a secured creditor. For example, if you own a car or a house that was purchased with a loan from a bank or credit union and the debt is not paid off, your equity (market value less the balance owing) is exempt up to the amount allowed by law, but you will still have to continue to pay for the car or house or the creditor can repossess it.

Debtors filing in the District of Oregon may elect to use the exemptions provided by federal law or those provided by state law (but not both).

Federal Law. Federal exemptions are set forth in section 522(d) of the Bankruptcy Code (abbreviated as 11 U.S.C. §522(d)). In a case involving joint debtors, one debtor may not elect to use federal exemptions and the other elect to use state exemptions. If the debtors cannot agree on the exemptions to be used, they shall be deemed to have elected federal exemptions.

State Law. To claim an exemption under Oregon law, the debtor must be domiciled in Oregon for the 730-day period immediately preceding the filing of the bankruptcy petition. Otherwise, the law of the state where the debtor was domiciled for the 180 days immediately preceding such 730-day period is used.

It either scenario, if no one objects to the exemptions you have listed within 30 days following the conclusion of the meeting of creditors (or within 30 days following the filing of any amended claim of exemption, whichever is later), these assets will not be a part of your bankruptcy estate and will not be used to pay creditors through your bankruptcy case. Deciding which assets are exempt and how and if you can protect these assets from your creditors can be one of the more important and difficult aspects of your bankruptcy case.


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