September 18, 2018

How the Georgia “Wildcard” Exemption Can Save You Thousands When You File Bankruptcy

When you file either a Chapter 7 or a Chapter 13 bankruptcy, you are allowed to declare certain property as “exempt.” Exempt property does not count as an asset for bankruptcy calculations. This is why you will not have to give up household items like your clothes, kitchen utensils and furniture when you file bankruptcy.

Exemption analysis can be one of the more confusing parts about filing bankruptcy. The Bankruptcy Code says that every state has the option of creating its own list of exemptions or state legislatures can defer and use a list of exemptions set out in the Bankruptcy Code.

The Georgia legislature has chosen to “opt out” of the federal scheme and the Georgia legislature has passed a list of exemptions which can be found at the Official Code of Georgia, section 44-13-100.

With limited exceptions for people who have recently moved to Georgia, bankruptcy filers who live in Georgia must use the Georgia exemption statute in their bankruptcy filings. So, even though the bankruptcy laws are issued by the United States Congress, Georgia bankruptcy filers use Georgia state law when it comes to identifying property that they can protect in their bankruptcy petitions.

Exemption Information on the Internet Often Incorrect

If you have been researching bankruptcy on the Internet, you can easily get confused because blogs and websites produced by non-Georgia lawyers will reference exemptions that don’t apply to Georgia filers. Further, the Georgia legislature has been updating (and increasing) the exemptions available to Georgia filers and many websites published by national legal publishers are not updated. Currently, for example, a very prominent and well respected legal publisher whose site appears at the top of Google’s rankings shows an version of Georgia’s exemptions statute that is outdated by more than 5 years and completely inaccurate.

Because the Georgia legislature does change the exemption statute every year or two you should be very careful about accepting as true anything you see on the Internet about exempt property in Georgia. I am writing this article at the beginning of 2018 and I intend to keep it updated but if I was researching bankruptcy I would confirm anything I read with an experienced personal bankruptcy lawyer.

What Property Can You Protect When You File Bankruptcy Using the Georgia Exemption Statute

Currently, as of January, 2018, the Georgia exemption statute lists several categories of property that you can protect when you file bankruptcy, including:

  • $21,500 of equity in real estate
  • $5,000 of equity in motor vehicles
  • $5,000 of equity in household goods (with no one item worth more than $300)
  • $500 of equity in jewelry
  • $1,500 of equity in tools of the trade
  • $2,000 of equity in cash value of an insurance policy
  • 100% of the value of an IRA, 401(k) or pension
  • 100% value of Social Security benefits
  • $1,200 of value in any property, plus up to $10,000 of unused real estate exemption [this is the “wildcard” provision]
  • the state includes a few more categories that apply in limited circumstances – you can read the actual statute here.

If you are married and file jointly with your spouse, you may double the exemption amounts.

How Do Exemptions Work in Your Bankruptcy Filing?

When you declare property as bankruptcy, that property does not exist for bankruptcy purposes and neither the trustee or creditors can assert any claims on it.

In a Chapter 7 bankruptcy, one of the jobs assigned to the trustee is to marshal your assets, sell them and distribute the proceeds to your creditors based on a priority system set out in the Code. When you declare your assets as exempt, the trustee cannot grab your assets.

Let’s say, for example, that you own, free and clear, a car worth $16,500 and a truck worth $16,500. You file Chapter 7 and declare the car exempt:
$16,500
($5,000) motor vehicle exemption
($10,000) unused real estate wildcard
($1,500) wildcard
____________
$0 equity available for the trustee to liquidate

You will notice that the law allows us to “stack” your exemptions – in the example above, I was able to add the motor vehicle exemption to the wildcard exemption to protect all the equity in the car.

However, there is no exemption remaining to protect the truck – it is considered non-exempt equity. So in this case, the trustee would ask you to turn the truck over to his/her office, sell it and distribute the proceeds to creditors. In the alternative, you could approach the trustee and offer to “buy the estate’s interest” in the truck with funds borrowed from a relative or friend.

As a practical matter, most Chapter 7 cases are “no asset” cases, meaning that everything the debtor owns is exempt.

In a Chapter 13 bankruptcy, your non-exempt equity is one factor to determine how much you pay in your Chapter 13 plan. Unsecured creditors in Chapter 13 have to receive at least as much as they would in a Chapter 7 liquidation.

Your Wildcard Exemption Can Save You Thousands

As you can see, the wildcard exemption can make a huge difference in either Chapter 7 or Chapter 13. For an individual, we have up to $11,500 of exemption to apply to any property, and for a joint filing we have $23,000 to apply to any property.

The wildcard can be added to any other exemption (as shown in the example above) or it can be used for cash. Many times, the wildcard exemption can make the difference between choosing Chapter 7 vs. Chapter 13, or it can reduce by thousands what you have to pay back in your Chapter 13.

Since $10,000 (or $20,000 in a joint filing) of the wildcard available to you arises from your real estate exemption, it is worth your while to spend a little time coming up with an accurate real estate valuation. In general, I am looking for the lowest real estate valuation that I can defend.

I recommend to my clients that they call a local real estate agent for a “drive by” valuation that takes into account any needed repairs. I also look at Zillow.com (many trustees use this site to estimate valuation) and if the drive by appraisal is significantly lower than Zillow I many recommend a more in-depth drive by appraisal or perhaps a more formal appraisal.

If you are considering filing personal bankruptcy in the Atlanta or north Georgia area and you need advice about how to maximize your use of bankruptcy exemptions, please reach out to me – I’d be happy to walk you through the calculations.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

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