The Wildcard Exemption is available to folks who are filing a Chapter 7 bankruptcy. In Chapter 7, you are allowed to keep some assets. Some states have adopted the Federal property exemptions that cover things such as your home, car, jewelry, clothing, and household goods. States that do not use the Federal exemptions have their own and they often correlate to the federal exemptions. Many states also have what is as a wildcard. This allows tor a sum of money to be added to any other exemption or exempt property not covered by the statutory exemptions. Poker players are familiar with Wild Cards. If Jacks are wild in a poker hand, a person with two jacks and two aces can declare that the hand being held has four aces, they are the two real aces and the wild cards being designated as aces. The Wild Card Exemption works in a similar fashion.
How Wild Card Exemptions Work.
In your state, under a Chapter 7 bankruptcy a petitioner (a person filing bankruptcy) is allowed an exemption for their car if it is worth $3500 or less. If the car is worth five thousand dollars, the trustee has the right to sell the car to pay off debts. But the Wild Card Exemption in the state is $2,000. A petitioner may apply $1,500 of the Wild Card Exemption towards the value of the car – this increases the threshold for being able to keep a car to $5,000.
As there is still $500 left from the Wild Card Exemption the petitioner can do the same towards the exemption for other items such as clothing, appliances and furnishings, books, and household goods. A petitioner has a choice where to use the balance.
Other Ways to Use the Wild Card Exemption
There are categories of property for which a given state does not offer an exemption. But, all states that have their own bankruptcy laws and do not mandate that the federal laws and rules be followed do have exemptions. This means that people filing for bankruptcy can create their own exemption. Imagine that pets are not included in the exemption for a particular state. A petitioner can use part or all of the Wild Card Exemption to create an exemption for a pedigreed Portuguese Water Dog. Perhaps a state does not allow an exemption for collectibles and a petitioner has a baseball card collection. Again, the Wild Card Exemption can be used to save the collection of baseball cards from being liquidated.
The following states allow you to choose between state and federal exemptions. However, exemptions are not like a menu where you can choose from column A or Column B or both. You must use either your state exemptions or your federal exemptions. Following are states that allow you to choose:
Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin.
When choosing exemptions it is very important that a petitioner speak with a qualified bankruptcy attorney so that maximum use of the Wild Card Exemption can be obtained. In poker, a wild card can turn a losing hand into a winning one. In bankruptcy, the Wild Card Exemption cannot quite achieve that, but it does allow petitioners to have some choices about their property.
photo by EDD07