On July 1, 2013 the Governor signed a historic law that now allows people filing either chapter 7 or chapter 13 bankruptcy in Oregon to elect to use Federal Bankruptcy Exemptions. This is an enormous change to consumer bankruptcy in Oregon and will have a substantial impact on cases now being filed.
To put it simply, exemptions are the laws that debtors in bankruptcy use to protect what they own. For example, a single debtor in Oregon had available an exemption (ie; “protection”) of up to $3,000 in car equity, $40,000 in home equity, $3,000 in household goods, $1,800 for clothing and jewelry, etc. A single debtor in Oregon was also only allowed a $400 “wildcard” exemption to protect things like cash, tax refunds and other personal property. As you can imagine, this $400 didn’t go far to protect many assets and allowed the Trustee to claim an interest in various items, using the proceeds to pay creditors some money.
Prior to this law a debtor who filed bankruptcy in Oregon was required to use only the Oregon exemption scheme. Now, Oregon has joined the list of states who allow debtors to either choose their state exemption scheme or the Federal exemptions.
I see this change as having a substantial effect for several debtors who had minor assets that were not able to be protected with the paltry Oregon exemptions. Under the Federal exemption laws, a single Debtor will have available a wildcard of up to $12,725, rather than the $400 Oregon wildcard. This change alone will eliminate most Oregon cases from being “asset” cases. I was talking to a local chapter 7 Trustee in Oregon a couple weeks ago who said that approximately 16% of cases in Oregon are asset cases where the Trustees are able to administer (claim) assets and use proceeds to pay creditors. In contrast, in Washington, only about 2% of cases are asset cases. The big difference? Washington also allows debtors to use Federal exemptions if they choose. I believe in Oregon the percentage of asset cases going forward will mirror Washington’s. This is a huge victory for anyone looking to file bankruptcy in the future in Oregon.
The Federal bankruptcy exemptions not only have a much better wildcard exemption, they also have a much higher household goods exemption ($12,250) and the automobile exemption is $3,675. As a bonus, under the Federal exemption scheme a debtor may “stack” the $12725 wildcard on top of any other exemption. This is not allowed when using Oregon exemptions.
The bottom line of all of this, is if you have considered filing bankruptcy in Oregon in the past, but were concerned with losing some assets, now is a great time to seek advice from a qualified bankruptcy attorney. With Federal bankruptcy exemptions now available, this is a great time to see if a Chapter 7 or Chapter 13 can help get the fresh start that you need – and, there is a much better chance that you can keep all of your assets through the bankruptcy.