What is the wild card exemption in bankruptcy?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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In a Chapter 7 bankruptcy you as a debtor are required to turn over much of your available cash and many of your personal belongings and assets in order for those items to be sold. The money you contribute and the proceeds from the assets you sell are then distributed among the creditors to whom you owe money and then any remaining balance on debts that are eligible is discharged. However, there are certain assets you do not turn over referred to as Chapter 7 bankruptcy exemptions. The wild card exemption in bankruptcy is one example of an exemption.

The wild card exemption allows you to keep assets or property that are not usually exempt under other Chapter 7 bankruptcy exemptions. For example, you may have a $1,325 wild card exemption. This would allow you to keep $1,325 of any assets that you would otherwise have to turn over. You might use this exemption for things such as a four wheeler for your kids, your engagement ring, a family heirloom or any other personal property that you own that you do not want to give up.

The term wild card actually refers to two different potential Chapter 7 bankruptcy exemptions that you may have. The first type is a general wild card exemption that allows you to use an allotted amount and exempt a set amount of property as long as the value does not exceed the limits set in your state. This is similar to the example given above.

The second wild card allows you to use a portion of an allotted and unused homestead exemption for whatever property you wish to exempt. The homestead exemption normally permits you to keep some of your home equity. If you don’t have home equity to keep, the amount that you would have been entitled to may then become a wild card exemption and you’ll be able to keep other property up to that value. This usually applies when you are a renter and don’t have a homestead to claim.

The wild card exemption applies only in Chapter 7 bankruptcy and not in Chapter 13. The value of both types of wild card exemptions vary from year to year, and can even vary by state. In fact, some states do not utilize the first type of general wild card exemption discussed above. Because of the variations in the rules regarding Chapter 7 bankruptcy exemptions, before you attempt to claim this exemption you should consult with a Chapter 7 bankruptcy attorney in your jurisdiction to find which apply in your state and situation.

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