Nevada’s Bankruptcy Exemptions
What Are Bankruptcy Exemptions?
Without Nevada's bankruptcy exemptions, upon filing a Chapter 7 bankruptcy, you would have to give all of your property to the trustee who would then sell of your property and (minus a 10% fee) the trustee would then use the proceeds of the sale to pay off creditors. Of course, if this were to occur, bankruptcy would only be feasible to either a small percentage of debtors or the very desperate.
Luckily, Nevada bankruptcy exemptions, for the vast majority of Chapter 7 filers, allow you to keep all of your property. Before I explain, in more detail, what exactly exemptions are, it is helpful to learn some background information. Once you file a chapter 7 bankruptcy a debtor's estate is formed, which is controlled by a Bankruptcy Trustee. ("Trustee") The debtor's estate consists of all of the property that you own at the time you file for bankruptcy. The Trustee's goal is to maximize the amount of recovery for any creditors. Therefore, a Trustee is obligated to sell off all non-exempt property for the benefit of the Creditors.
Exemptions allow you to keep necessities that are needed for you to get a fresh start fresh after your bankruptcy discharge. Federal bankruptcy law allows a state to use federal, a states specific bankruptcy exemption or a choice among the two. Nevada though only enables debtors to use Nevada bankruptcy exemption. For example, in Nevada, most debtor's furniture is protected by Nevada bankruptcy exemptions ($12,000 of furniture is exempt); but, Nevada's exemptions do not allow you to keep a boat or a timeshare. So, to avoid disastrous consequences, if you are contemplating bankruptcy it is highly recommended that you set up a free consultation with a bankruptcy attorney from Las Vegas (assuming you live in Vegas) or wherever you currently live.
Exemptions are determined by the amount of equity that you have for your personal property. For property that you own, free and clear, the equity is the fair market, value of your property. Secured property is property where a lien holder or creditor has the right to seize property when you are behind on your payments. With secured property, equity is determined by the market value of your personal property minus the outstanding value of all liens on your property. For example, if your car's market value is worth $14,000, and the creditor's lien is $10,000, your equity for your car would be $4,000.
It needs to be noted that you can retain nonexempt property or property that is not fully covered. However, you will have to pay the trustee the market value for the non-exempt property. Some of the most popular exemptions, for Nevada, allow a bankruptcy filer to retain furniture worth up to $12,000, $16,150 of a personal injury reward, a single firearm (this exemption is unlimited), up to $5,000 in equity for art, books, jewelry, and musical instruments, and $10,000 for tools of your particular trade. ("Tools of the Trade" range from a mechanics "Snap-On" tools to a software programmers laptop) Nevada also has a generous, $550,000, real estate exemption, which applies if you have filed a declaration of homestead and if you reside in the property that you are declaring is exempt.
There are also some exemptions that are virtually unlimited. Prime examples of these are health aids; restitution received as payment from you being a crime victim, money held in deposit by a landlord, and automobiles that are equipped for the disabled. It is also interesting to note that Nevada bankruptcy exemptions allow you also to keep one gun selected by the debtor. Thus, a firearm worth thousands of dollars is exempt. Some other popular Nevada bankruptcy exemptions are the following: funeral plot and funeral service contracts that are held in trust,
keepsakes and pictures worth up to $5,000, libraries, art, jewelry and music instruments whose value does not exceed $5,000, and unlimited, unemployment compensation, and vocational rehab support.
The Wildcard Exemption
Nevada has a very generous, $10,000, wildcard exemption. The Wildcard exemption is a catch-all exemption that that allows you to exempt any property that is not explicitly covered by a bankruptcy exemption, or when an exemption does not adequately cover exempt property.
Example- You want to file bankruptcy. But, your car has equity of $20,000. As it was stated earlier, Nevada's automobile exemption is limited to $15,000. Thus, if $5,000 of the wild card is applied to the car, you'll be able to keep your car, and you will also have $5,000 left of the wildcard exemption.
Exemptions must be used at the time of filing, or you will be taking a risk that they may not be able to be even used. Additionally, being mistaken that you qualify for an exemption when you don't, can also be financially disastrous. For example, you could have to sell your house, if you have $200,000 in equity in your home if you did not file a homestead declaration. Therefore, if you are contemplating bankruptcy, it is highly recommended that you set up a free consultation with a bankruptcy attorney from Las Vegas (assuming you live in Vegas) or wherever you currently live. Also, even if your possessions are limited, as you will be discharging potential six figures or more of debt, it makes good financial sense to retain an experienced bankruptcy lawyer.