Edith files a Chapter 7 petition in bankruptcy. She owns the following property: (1) an automobile valued at $1,800; (2) a homestead valued at $75,000, on which First Bank holds a mortgage of $60,000; (3) personal jewelry valued at $1,100; and (4) monthly disability payments of $1,000. Assuming Edith elects to use the exemptions listed in the Bankruptcy Code, what property may Edith keep?

Question

Quizplus · Accepted Answer

Under the Bankruptcy Code, Edith is eligible to use exemptions to keep certain property. For a homestead, the federal exemption limit is $25,150. Since Edith's homestead is valued at $75,000 and has a mortgage of $60,000, her equity in the property is $15,000, which is less than the exemption limit. Therefore, she can keep her homestead. For an automobile, the federal exemption limit is $4,000. Since Edith's automobile is valued at $1,800, she can keep it. For personal property such as jewelry, the federal exemption limit is $1,700. Since Edith's jewelry is valued at $1,100, she can keep it. Finally, for disability payments, the federal exemption limit is unlimited, so Edith can keep her monthly disability payments of $1,000. Therefore, Edith can keep the disability payments plus the automobile, the homestead, and the jewelry.

Edith Files a Chapter 7 Petition in Bankruptcy