When a bankruptcy petition is filed, the debtor is required to identify and disclose all of their assets. This includes physical assets such as real estate, automobiles, and personal property. However, it also includes many intangible assets such as retirement plans, IRAs, claims for money or damages, insurance policies, and many other non—physical assets. One of the primary topics of conversation in any bankruptcy consultation should be the description of assets and how they can be protected (the bankruptcy term is “exempted”) when a bankruptcy petition is filed. Many potential debtors realize that there are protections in place for their homes, automobiles, and tools and/or equipment that they may use in their particular profession. But the exemptions available to debtors under Georgia law extend far beyond these physical assets. Below is a partial list of some of the property that you may not realize can be protected in a bankruptcy case.
- A whole life insurance policy can be protected if the cash value does not exceed $2000. An unmatured term life insurance policy is protected up to the full amount of the face value. Distributions from any life insurance policy to a debtor can be protected to the extent that the debtor was a dependent of the individual who died, and the funds are necessary for their support.
- The right to receive a veteran’s benefit such as military retirement or VA disability is entirely exempt, regardless of the amount.
- The right to receive a government benefit such as Social Security or unemployment is entirely exempt, regardless of the amount.
- The right to receive child support, alimony, or any other payment under a domestic support obligation order, is entirely exempt, regardless of the amount.
- The right to receive pension payments under a public employment plan or similarly situated private employment plan are entirely exempt, regardless of the amount.
- Funds held but not distributed in an IRA, Thrift Savings Plan, or 401(k), are entirely exempt to the extent that the plan was funded by the debtor’s earnings or employer contributions.
- A claim for bodily injury (related to an automobile accident, slip and fall, or worker’s compensation claim), such as pain and suffering, can be protected up to $10,000. If there is also a loss of future earnings or compensation associated with such claim, those lost earnings/compensation can be entirely exempted.
- Professionally prescribed health aids for the debtor or their dependent are entirely exempt.
- If a debtor does not own any real estate, they may be able to exempt up to $11,200 in an income tax refund.
A common mistake that potential bankruptcy filers make is to assume that some of these assets cannot be protected, and then take steps to transfer or liquidate the assets prior to meeting with a bankruptcy attorney. Liquidating or transferring exempt assets causes them to lose their protected status. This is not an exhaustive list, and there may be exceptions where some of the exemptions do not apply and cannot be protected, depending on how the property was acquired, and/or how long the debtor has resided in the state of Georgia. The most important thing to remember is that all of your assets must be fully disclosed to the attorney so that they can make the appropriate recommendations as to how to protect them in a bankruptcy filing.