Recent Increases in Oregon Exemptions
The vehicle exemption increased from $2,150 to $3,000, and the homestead exemption increased from $30,000 to $40,000 for a single homeowner and from $39,600 to $50,000 for married homeowners filing bankruptcy jointly. This means that in a Chapter 7 case a single person, for instance, can now keep a vehicle worth up to $3,000. This also works for a vehicle with equity (its value beyond the debt) of that same amount. Same story with a home: the Chapter 7 trustee--and the creditors the trustee serves--can't touch equity in a home up to $40,000 for that single person or $50,000 for a married couple.
But the other advantages are where it gets interesting, and especially beneficial to you. Here are just two of them:
1) If your home or vehicle is still worth more than the increased exemption amounts, you would not have to pay as much to your bankruptcy trustee in order to keep those assets.In a Chapter 7 case, if you own a vehicle free and clear worth more than the exemption amount, the trustee would be able to take that vehicle from you, sell it, pay you the exemption amount, and distribute the rest among your creditors (after taking his or her own fee). So it you owned a vehicle worth $5,000, the trustee would sell it, pay you the exemption of $3,000, and pay the remaining $2,000 to the creditors and his or her fee. To prevent losing your vehicle, we can often arrange for you to keep it in return for you agreeing to pay the trustee approximately the amount the creditors (and the trustee) would receive if the trustee would have sold it--here $2,000. Because the amount you would have to pay is reduced by the amount of the exemption, its increase from $2,150 to $3,000 saves $850 in what you would have to pay the trustee.
And because in a jointly filed case (by a husband and wife) you can double the exemption on one vehicle, in the right case you could have twice as much savings, $1,700.
In a Chapter 13 payment plan, similar savings could occur: because you must pay to creditors over the plan's 3-to-5 years at least as much as they would have received in a Chapter 7 case. So in the right Chapter 7 case, the amount you would have to pay the creditors before completing the case could be $850 or $1,700 less.
2) This increase in the homestead exemption in particular allows you to get rid of more judgment liens on your home than you could before. If a creditor sued you and got a judgment against you before you filed your bankruptcy--a quite common occurrence--that judgment would usually be a lien against the title of your home. There is at least a serious risk that even after you file a bankruptcy and get a write-off of the debt that resulted in that judgment, the judgment lien would remain on the title. This problem can be prevented if that judgment lien is "avoided" under bankruptcy during either your Chapter 7 or Chapter 13 case. The larger homestead exemption makes it more likely that you can avoid a judgment lien.
The easiest way to explain this is with an example. If you and your spouse's home is worth $250,000 and has a mortgage of $200,000, that leaves equity of $50,000. That equity would be protected by the $50,000 homestead exemption. Now say you have a judgment against the two of you by a collection company on medical bills in the amount of $45,000, and that judgment created a lien against your home. In this case we could "avoid" the judgment lien to a maximum amount of the $50,000 homestead exemption a judgment lien, in other words the entire amount of the lien. However, if we still had the old homestead exemption amount of a few months ago, we would only be able to "avoid" $39,600 of that judgment, leaving the difference--$5,400--as a lien against your property. After the bankruptcy was completed, you would likely have to pay that, whenever you sold or refinanced the home, if not sooner. The increased homestead exemption amount prevents that from happening.
There are many other advantages to these increased exemption amounts. Please give us a call—in Oregon at 503-253-7777 or in Washington at 360-882-7777—to hear how we can help you get maximize the benefits of these increased exemptions.