According to the Oregon U.S. Bankruptcy Court, when you file for Chapter 7 bankruptcy, you hand over possession of certain assets to a trustee, who then sells the assets and pays as many of your debts as possible. However, during this process you may be able to keep property that is exempt from liquidation under federal or state bankruptcy laws. If you file for Chapter 7, you may choose to use either state exemptions or federal exemptions, but are prohibited from using both.
The United States Bankruptcy Court for the District of Oregon states that some of the most common federal and state exemptions you can claim include homes, land, cars, trucks and household goods. You may also claim business items, professionally prescribed health aids, wages and spousal or child support. Your Social Security benefits, any personal injury compensation and retirement benefits may be fully exempt under both federal and Oregon law. However, the exempted amount for each of these assets is subject to change depending on the bankruptcy laws in effect when you file.
The value of an exemption may be less than the unsecured value of an asset. If this is the case, it would allow your trustee to sell the asset and simply refund any exempt amount to you. For example, if you own a home with $125,000 in equity and choose to use Oregon exemptions when you file your bankruptcy as an individual debtor, you may only be able to claim $40,000 as exempt under the law. Your trustee may then sell the home and refund your $40,000 to you while using the other $85,000 to pay your debts. It should be noted that this information is for educational purposes only, as bankruptcy law is complex and subject to frequent change.