When you are considering whether to file bankruptcy or not, the first question that comes to mind is, what will I lose. The answer to this question is not simple and varies greatly between cases. This variance is caused by the amount owed on something, its value, the use of the item and many other factors.

The first question that must be addressed is, what exemptions do you get to claim in a bankruptcy case? That is easy to determine or is it? Congress did not choose to have one uniform set of exemptions for all bankruptcy cases. It has allowed the states to have input into exemptions that are allowed to debtors who file in a particular state.

In some states such as Florida and Texas, it does not matter how much equity you have in you home, you get to keep all of the equity. A plan that was done by more than one debtor was to leave a state with poor or low exemptions and move to a state with more liberal exemptions. It was not uncommon to see someone leave a state, move to Florida and pay cash using all of their assets to purchase a home and move in. The debtor would then file bankruptcy and get to keep all of the value to start over their life.

The purpose of exemptions is to help an honest debtor to start over. If you have no assets, how do you borrow money to start a new business, get an income stream going again, hire people and build the economy. In the old days, if you ran into a financial problem, you moved 200 miles away, burned some woods and started a new farm. If you lived in Charleston, South Carolina and moved to Columbia, South Carolina, it would take weeks for anyone to reach you. Of course, before that many poor from Europe would sell themselves into indentured servitude for seven years to get passage to the New World and new life.

Some people believe that if you go broke that you should lose everything. Those people simply do not understand that if a person cannot make a living in the normal economy, they will make a living in the underground economy. The problem with that economy is that one day, the person in the underground economy can no longer produce and then you and I have to start taking care of that person who has no pension, 401k or IRA. Now you have to carry people that you should not have to take care of because they lived like the cricket who played in the spring and summer and then had to be taken care of in the winter of their lives.

For all you really young folks, read Aesop fables, the story of the cricket and the ants.

I will be going over the exemptions and how to apply them in future posts.  This is such a complex area of Bankruptcy Law that I am still amazed at how things come out so differently in what appear to be the similar cases.


About Nathan Davis, Esquire

Born in Charleston, South Carolina, Nathan Davis has been practicing law for many years. Mr. Davis has a wide variety of experiences having practiced domestic relations, criminal law, social security law having also practiced collection law in the past. This knowledge is helpful when someone needs to restart their financial life. The practice is now primarily bankruptcy and debtor representation work, but, Mr. Davis continues to also practice real estate law, trusts and estates and a general litigation practice. I believe that the most important part of representation is trying to leave you better off when the case is finished than when you started. Although I will do as my client directs, I will always tell you if I think that you are making a mistake. Bankruptcy is about a "fresh start". If you do not make changes in what you are doing, you will be doing what you are doing now in the future. There is no shame in bankruptcy or other steps that you may take to start your life over. Too often, people worry more about things than about themselves, their family or their future.
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