Filing for bankruptcy protection does not necessarily mean giving up all of your property and assets. In both Chapter 7 and Chapter 13 bankruptcy filings, exemptions allow you to hold onto certain assets. Depending on the particular item, your property may be protected up to a certain dollar amount. In other cases, the protection is unlimited.
Federal bankruptcy code and U.S. Virgin Islands territorial law may have different levels of protection for different types of assets, but you are required to use only one set of exemptions or the other — rather than picking and choosing when it comes to each item.
Chapter 7 and Chapter 13 bankruptcy exemptions work in different ways. In Chapter 7 bankruptcy, exemptions help you keep property and assets, and anything you’re able to exempt the trustee cannot sell. In Chapter 13 bankruptcy, exemptions allow you to keep your assets, but require you to pay back your debt within a certain amount of time. Your payments are determined by a combination of disposable income and non-exempt assets. The more you can exempt, the lower and more manageable your monthly payments will likely be.
U.S. Virgin Islands law provides protection for many different types of assets during a bankruptcy. In fact, most exempted assets are protected without a cap on the dollar amount. The exception to this rule is the homestead exemption, which is protected up to $30,000, plus a $3,000 exemption for household goods currently in use and owned by the head of the household. Otherwise, there is no maximum amount for other exempted assets, including a variety of government benefits like unemployment, disability and public assistance and life insurance policies.
Federal exemptions offer some slight variations, mostly in that many assets have caps on the dollar amounts that will be exempted. Home equity, for instance, is protected up to $22,975 (or $45,950 for a couple). However, federal law also provides for exemptions that Virgin Islands code does not, and in most cases, the limits are doubled for a couple filing jointly for bankruptcy. For example, motor vehicles up to $3,675 ($7,350 joint) are exempted. Jewelry, which is specifically not exempted through local law, is exempt up to $1,550 for an individual and twice that for a couple under the federal code.
It’s also important to note that choosing whether to use the territorial or the federal exemptions may depend on how long you have resided in the U.S. Virgin Islands. If you have not lived in the Territory for the two years prior to filing, you may face challenges in attempting to secure exemptions under the Virgin Islands code. For this reason, and because the distinctions between federal and territorial bankruptcy exemptions can be difficult to understand, you should work with a skilled bankruptcy attorney throughout the process.
BoltNagi is a widely respected and well-established civil litigation law firm serving individuals and businesses throughout the U.S. Virgin Islands.