Readers in Tennessee may be interested to hear that the wife of former NASCAR driver Jeremy Mayfield recently filed for Chapter 7 bankruptcy. She filed for bankruptcy protection independent of her husband, listing liabilities between $1 million and $10 million and assets up to $50,000. She was able to stay an impending foreclosure on the couple’s home by filing for bankruptcy protection.
In cases of personal bankruptcy, such as the one noted above, there are several bankruptcy exemptions that offer protection to debtors going through filing process. These exemptions allow debtors to retain ownership of certain property over the course of bankruptcy proceedings. However, it is important to note that Chapter 7 exemptions differ from those allowed under Chapter 13.
Chapter 7 bankruptcy involves the liquidation of a debtor’s property and assets to pay off the debtor’s creditors. Because most of the debtor’s property must be turned over and sold, federal and state laws allow certain properties to be exempt from bankruptcy.
Chapter 7 exemptions may include homesteads, jewelry, vehicles, pensions, personal injury settlements and household goods, to name few notable items. Most of these exemptions are capped at a certain value, but federal and state regulations may apply.
In Chapter 13 bankruptcy, a debtor seeks to restructure his or her debt into a payment plan that typically lasts between three to five years. Although the debtor’s property is typically not sold during a Chapter 13 bankruptcy proceeding, the debtor’s property is taken into account when structuring the debtor’s repayment plan. This property is used to determine the minimum value offered in the debtor’s repayment plan.
Chapter 13 exemptions allow certain things to be excluded from the calculation of debtor’s total property. Federal and state laws set maximum values for Chapter 13 exemptions, which typically include exemptions somewhat similar to those included in Chapter 7
There is a major difference between Chapter 7 and Chapter 13 bankruptcy. Knowing this, Mayfield’s wife hopefully sought legal counsel to determine that it was best to file for Chapter 7 independently. Additionally, she was likely advised as to what kind of property should list as exempt from the bankruptcy proceedings. This way, she could live in relative comfort while working to regain a sense of financial health.
Source: The Charlotte Observer, “Wife of NASCAR’s Jeremy Mayfield files for divorce,” Sarah Newell Williamson, May 19, 2012
