When preparing for your bankruptcy filing, you may have some nonexempt property that will be subject to liquidation by the bankruptcy trustee.
What is the distinction between exempt and nonexempt property? Click here: http://arnoldwadsworth.com/bankruptcy/exemptions/
You may use the benefit of the exemptions even if you are using nonexempt property to obtain the exempt property. For example, if you have $10,000.00 in cash reserves under Utah law the trustee will take all of this money if you file bankruptcy because Utah does not have any cash exemption (which is absolutely ridiculous by the way), but you may take that entire $10,000.00 and purchase $10,000.00 of food storage with no problem.
Another hot bottom item that trustees like to hit on is wages and bonuses. In Utah, you may claim as exempt property 75% of any unpaid wages. The way this often comes up is where you are due a bonus check for a certain quarter of the year, but your employer hasn’t paid it yet. The problem is you usually are not “owed” the bonus and it is merely gratuitous in nature. This argument won’t get you anywhere though in practice. Regardless of whether you think you will get the bonus or not, you need to tell your attorney about it so it can properly be accounted for in your paperwork (if you don’t your trustee could use this as grounds to revoke your discharge and you don’t want that…I have never had this happen and I would hate to have this happen to a client). Basically, the result is you will have to take 25% of the net gain from the bonus and give it to the trustee.
Matt Wadsworth is a partner at Arnold & Wadsworth and serves debtors filing for Chapter 7 or 13 bankruptcy in Salt Lake City, Draper, South Jordan, Bountiful, Layton, Ogden.