Good news for Oregonians who are considering filing for bankruptcy protection. There are now two separate systems of exemptions to protect Oregon debtors in bankruptcy.
As discussed in another article, exemptions are legal protection for people who file for bankruptcy protection. The Bankruptcy Code contains a list of federal bankruptcy exemptions. However, the Bankruptcy Code also allows each State to opt out of the federal exemptions and establish its own list of exemptions. Oregon has chosen to provide its own list of exemptions and, until recently, Oregon prohibited the use of the federal bankruptcy exemptions.
That long-standing prohibition changed on July 1, 2013, when Governor Kitzhaber signed SB 396 into law. That new law allows Oregonians in bankruptcy to use either the federal bankruptcy exemptions or the Oregon state exemptions (but not both). This new protection applies to all bankruptcy cases filed or or about July 1, 2013.
This is a powerful new tool for debtors in Oregon. It gives Oregonians two separate systems of protections and allows Oregonians to choose the system that is most beneficial for them.
There are several major differences between the two exemption systems. Here are a few differences:
- Oregon’s exemptions for homesteads and tools of the trade are more generous than the federal exemptions; but, the federal exemptions for household goods and vehicles are more generous than Oregon’s exemptions.
- Oregon has a specific exemption for certain firearms, which does not exist in the federal exemptions.
- Spouses filing a joint bankruptcy may double their federal exemptions; only some of Oregon’s exemptions may be doubled.
- The federal “wild card” exemption is $1225, instead of $400 for Oregon. The federal “wild card” exemption may be “stacked” on top of other exemptions to increase the protection amount; Oregon exemptions may not be stacked.
- Under the federal exemptions, debtors can “borrow” up to $11,500 of unused homestead exemption and apply that protection to any property.
- Federal exemptions are adjusted every three years; the last adjustment was in April 2013.
One item to be aware of: Federal bankruptcy exemptions are available to Oregonians only in a bankruptcy proceeding. Oregonians cannot claim those federal exemptions is any other context, such as execution and sale of assets outside of bankruptcy.
A list of common Oregon exemptions can be found here.
A list of the federal bankruptcy exemptions can be found here.
The decision of whether to use the Oregon exemptions or the federal bankruptcy exemptions will be part of your overall bankruptcy strategy. At a minimum, having the option of choosing the federal bankruptcy exemptions will give Oregonians more options and greater overall protection in bankruptcy proceedings.
If you have questions about how these new exemption protections might affect you, you should discuss your situation with a knowledgeable bankruptcy attorney.