If you decide to come in and speak with an attorney regarding a bankruptcy filing it is likely that the attorney will ask you how many children you have living with you that are under 21.  These children that are living with you that you are helping take care of are your dependents and will be listed as such in your bankruptcy filing.

You may wonder why that is important.  The bankruptcy laws are set up to help the debtors protect certain assets.  The attorney that prepares your petition will use these laws to exempt certain property (such as cars, furniture, money in bank accounts and even your home) from your bankruptcy estate.  That is, the Trustee would not be able to get a hold of these assets, liquidate them and pay off your unsecured debt with the money they collect.  That is good news for the debtor.

It is obviously important then for a bankruptcy attorney to know the law and the exemptions that are available to use.  Section 513.430 sets out the “Head of Household” exemption and it states that the debtor is allowed to claim a $1250 exemption if they are head of household and they may also claim an additional $350 for each unmarried dependent child under the age of 21.  This means that if you want to file a Chapter 7 bankruptcy, but you have some money in the bank or are expecting a fairly large tax refund, your attorney may still be able to help you protect these assets.

Here is how the exemption would work…debtor wants to file a Chapter 7 to stop a wage garnishment, but they are expecting a $2000 tax refund in 2 months.  That tax refund is an asset of the bankruptcy so the Trustee could require you to turn it over so that he or she could pay off your creditors with it.  However, you have 3 children under the age of 21 that are all living at home with you.  Your attorney can apply the Head of Household exemption for $1250, plus $350 per child (for a total of $1050 for 3 children).  These would be a total of $2300 that the law allows you to exempt, which would cover the entire tax refund that you are to receive in 2 months.  That means you would not have to wait to file your bankruptcy, you could stop the garnishment right away and still be able to retain all of your tax refund.

These exemptions are important and you obviously will want to protect as much property as you can.  That is why, if you are thinking about filing for bankruptcy, it is very important to speak to an experienced bankruptcy attorney.  We offer free consultations at several locations in the St. Louis area.  Please contact us if you would like to speak with someone about your options.