Interviewer: In terms of the law, bankruptcy law’s federal, right? Does it differ by state?
Paul: Well, that’s an interesting question. It is usually federal, but certain states, such as Pennsylvania and New Jersey, both give you the option of selecting what’s called the “state exemptions,” which give you certain advantages in certain situations. You can either take the federal or state exemptions, in Pennsylvania or New Jersey. Some states don’t allow you to select what’s called, “Opt out.” Some only allow you to take their own state exemptions.
What Are Exemptions?
Interviewer: “Exemptions” meaning, I guess, how much equity you have in the house or car and if the bankruptcy will completely deplete that.
Paul: Yes. Exemptions mean, in general, what you’re allowed to keep, either in the filing of the Chapter 7 or Chapter 13, which are items that are unaffected by the filing.