Exemptions are available without bankruptcy
Sometimes clients need to delay fiiling bankruptcy. This delay may result for a number of reasons, including that you want to let certain taxes become dischargeable, you may want to wait until after the preference period has expired, or for some other timing reasons. Unfortunately, if judgment creditors are seizing assets clients feel exposed if they can’t file for bankruptcy. Is there any relief? Yes: exemptions are available under state law, even if you haven’t filed bankruptcy.
Exemptions are created by state legislatures. They represent the property that debtors are permitted to withhold from their creditors even if they’ve lost a lawsuit. Some states are more generous than others, and many states have additional exemptions that are available in bankruptcy. For example, in Maryland, debtors can keep $6,000 from their creditors, but in bankruptcy they’re allowed to keep another $6,000, known as the “wildcard” exemption. But you don’t have to file bankruptcy to claim exemptions.
For example, if you have a bank account that’s been seized and you’re not yet ready to file bankruptcy, you can file a motion with the court asking to apply the exemptions that you’re allowed under state law. The court will almost certainly grant you those exemptions and then allow you to recover that bank account or that other asset as long as the value of the asset that’s being seized is within the value of your allowed statutory exemptions.
