In our last blog we told you that the Oregon Legislature had just passed an increase in the “tools of trade” exemption from $3,000 to $5,000. We showed a number of ways this increase has a bigger impact than it sounds. In the case of a business-owning husband and wife, each person is given his and her own exemption, which they can combine. So with this increase their combined exemption in effect increased to $10,000. Considering that assets in bankruptcy are generally valued based on what they could be sold for in their present condition, $10,000 would cover a quite lot of business assets.
Not all exemptions in Oregon can be doubled like this for a husband and wife filing bankruptcy together. For example, the “household goods, furniture” exemption is fixed at $3,000, regardless whether you’re a single person filing a bankruptcy or a married couple doing so.
So what ARE the exemptions that are doubled when a husband and wife file a bankruptcy together? Besides tools of trade, other doubling exemptions include “books, pictures & musical instruments” ($600 per person), “wearing apparel, jewelry and other personal items” ($1,800 per person), a “motor vehicle” ($3,000 per person), and a general personal property exemption mostly used for cash on hand and money in bank accounts ($400 per person).
We’ll use the vehicle exemption to show different scenarios how this can help in a Chapter 7 case:
1. Husband and wife filing a joint bankruptcy, each own a modest vehicle free and clear:
Each can claim their own $3,000 exemption on each of their vehicles. As long as each vehicle is worth $3,000 or less, they will be able to keep both.
2. Husband and wife filing a joint bankruptcy, each own a vehicle with debt against it but each one is worth more than the debt on that vehicle:
Each can claim their own $3,000 exemption on each of their vehicles. As long as the amount of equity in each vehicle is $3,000 or less, and they keep up their payments to their vehicle lenders, they can keep both vehicles.
3. Husband and wife filing a joint bankruptcy, jointly own two vehicles, one free and clear and the other with more debt against it than it is worth:
Each can apply their $3,000 exemption on the one free and clear vehicle, doubling up on it, since the other vehicle has no equity that needs to be protected. As long as the amount of equity in the free and clear vehicle is $6,000 or less, they can keep that vehicle. They can keep the other one as well if they want to keep up the payments, or can chose to surrender it and owe nothing more on it.
4. Only ONE spouse files a bankruptcy, and they together own only one vehicle, free and clear:
Since the filing spouse owns only half of their single vehicle (assuming they both contributed to its purchase and upkeep, directly or indirectly), that spouse can claim her $3,000 exemption on that half of their vehicle. So that vehicle is effectively protected up to the value of $6,000.