Nevada Bankruptcy Exemptions and Law
If you are deeply in debt and being harassed by collections agencies over bills you know you can't pay, bankruptcy may offer a solution to your debt problems. Filing for bankruptcy will stop all collection efforts and give you the breathing room you need to either reorganize your debt so that it can be paid off or eliminate it entirely. Additionally, Nevada has enacted its own rules on the property you can keep after you file for bankruptcy.
Nevada Bankruptcy Law
U.S. bankruptcy cases take place in federal courtrooms under federal law, but Nevada has opted to put some of its own rules in place to protect the property of people who file for bankruptcy in the state. The property that is protected from your creditors is known as exempt property that should be available to help you move on with your life after you have finished with bankruptcy. The U.S. Bankruptcy Code lets states create their own rules regarding exempt property and Nevada has done so.
The Bankruptcy Code provides a set of federal exemptions, but Nevada has decided that if you file for bankruptcy in the state you must use its exempt property rules. Fortunately, most of the Nevada exemptions are more generous than the federal exemptions and allow you to keep more property than you would under federal law.
We list the Nevada bankruptcy exemptions below. Exempt property is protected from creditors during bankruptcy and you can keep it to restart your life after you have completed bankruptcy. Additionally, if you are married and file for bankruptcy in Nevada, both you and your spouse are entitled to a full set of exemptions for any property you own together. That often lets couples double their exemptions.
Nevada will let you exempt up to $605,000 of the equity you have in your home or mobile home. That amount doubles to $1.21 million if you file for joint bankruptcy with your spouse and you both own the home. However, before claiming the homestead exemption, you must first file a homestead declaration in the recorder's office for your county.
You can exempt up to 75% of your disposable earnings of more than $770 for a week and 82% of your disposable earnings of $770 or less. Future earnings are also exempt to the extent they are necessary for your support.
Motor Vehicle Exemption
Nevada grants you a $15,000 exemption for your equity in a motor vehicle. If the motor vehicle has been equipped for use by a disabled person, the entire value of the vehicle is exempt.
The motor vehicle exemption does not apply to recreational vehicles, boats, and additional automobiles.
The state gives you a $10,000 wildcard exemption that you can apply to any of your personal property.
Personal Property Exemptions
Nevada lets you exempt the following personal property:
- Up to $12,000 of the equity you have in appliances, furniture, electronics, clothing, household goods, and yard equipment
- Up to $5,000 of your equity in jewelry, art, musical instruments, and books
- Health aids
- Amounts in escrow and mortgage accounts
- Pictures and keepsakes
- Collections of ore, fossils, or other geological specimens that are numbered in reference books
- A burial plot or funeral service funds held in trust
Tools of the Trade Exemption
You can exempt up to $10,000 of the equity you have in professional equipment, supplies, and books that you use to carry on your trade or business. Farmers can take advantage of an additional $4,500 exemption for farm trucks, tools, equipment, supplies, and seeds. Finally, the state grants an exemption to any arms and uniforms you are required to keep by law.
Insurance Benefits Exemption
Nevada exempts life insurance and disability insurance.
Pension and Retirement Exemptions
Nevada provides an exemption for most pension and retirement benefits, including:
- Tax-exempt retirement plans such as 401(k)s, IRAs, and defined benefit plans
- Public employee retirement benefits
Public Benefit Exemptions
The following public benefits are exempt:
- Social Security
- Unemployment compensation
- Workers' compensation
- Public assistance for children
- Vocational rehabilitation benefits
- Child and spousal support payments
- Income tax refunds of the state or federal earned income tax credit
- Wrongful death awards necessary to support survivors
- Compensation for future earnings that is necessary for your support
- Personal injury settlements of up to $16,150
- Crime victim restitution
Nevada Bankruptcy 101
Almost everyone who files for personal bankruptcy in the U.S. does so under either Chapter 7 or Chapter 13 of the Bankruptcy Code. Filing under either chapter offers you protection from creditors and will help you reduce or eliminate your debt, but they provide you with different options and benefits. The chapter under which you choose to file may dictate how much debt you can get rid of in bankruptcy and what property you can keep.
Chapter 7 Bankruptcy
People will often refer to Chapter 7 bankruptcy as a “liquidation" bankruptcy because you must turn over any property not protected by a Nevada exemption to the bankruptcy trustee. The trustee will then sell the property and use the proceeds to repay your creditors.
You will usually emerge from Chapter 7 nearly debt-free because most of the unpaid debt remaining after the trustee has repaid your creditors will be eliminated. If you have few assets, all of your property will likely fall under one of Nevada's exemptions, which means you may be able to complete bankruptcy without losing any of your property.
Because Chapter 7 will often let you eliminate nearly all of your debt, Congress has put strict rules in place to make sure that only those who cannot otherwise pay their bills can file under the chapter. That means you will need to show the court that you have little to no disposable income if you want to file under Chapter 7.
Chapter 13 Bankruptcy
If you have a steady income, filing for Chapter 13 bankruptcy allows you to restructure or reorganize your debts so that you can afford to pay them back over three to five years under a court-approved plan. In addition to forcing your creditors to take payment in installments over several years, the plan may also compel them to forgive some of what you owe them.
The Automatic Stay Protects You From Creditors
One of the primary benefits of filing for bankruptcy under any chapter is that the court will issue an automatic stay to bar your creditors from trying to collect what you owe them. This is a potent tool because it will stop harassing phone calls, home and auto repossession, and even attempts to garnish your wages.
If a creditor that has been notified of the stay violates it by trying to collect, the court could impose penalties on the creditor and even force it to pay your attorneys' fees.
When you file for bankruptcy, nearly all of your debt will be placed into one of two categories: secured or unsecured. It is important to understand how much of your debt falls into each category. Both types of debt are treated differently in bankruptcy and their treatment will likely play a role in deciding the chapter you file under, how much debt you can eliminate, and what property you keep.
Nearly everyone who files for bankruptcy has at least some unsecured debt. You have unsecured debt when the individual or organization to which you owe money has no right to seize or repossess your property for non-payment. This is the type of debt that is most often eliminated in bankruptcy. The most common types of unsecured debt are unpaid credit card bills, medical bills, and court judgments.
You have secured debt when your creditors have the right to repossess or seize your property for non-payment. These creditors are said to have a security interest in your property that they hold to ensure that you repay them. There are many types of secured debt, but the most common in personal bankruptcies are home mortgages and auto loans.
Secured and Unsecured Debt in Chapter 7
When you file for bankruptcy under Chapter 7 you can often discharge nearly all of your unsecured debt. However, some unsecured debt will be prioritized and cannot be discharged. Examples of some of this priority debt include unpaid child and spousal support.
Your secured creditors generally fare better than your unsecured creditors in a Chapter 7 case. That is because bankruptcy does not affect the right of those creditors to seize your property for non-payment. While the judge will issue an automatic stay to stop all property repossessions when you file for bankruptcy, the judge will eventually allow unpaid creditors to seize your property. As a result, you generally have three options for resolving your secured debt obligations:
- Turn the collateral over to the creditor. This is usually the easiest option and, while you will lose the property, it is unlikely that you will need to make additional payments to the creditor.
- Keep the property and continue paying your creditor. This is usually possible when one of Nevada's exemptions covers your equity in the item and you work out a repayment agreement with the creditor.
- Pay the loan balance. This usually eliminates your creditor's security interest in the property and lets you keep it, but rarely happens because people filing under Chapter 7 usually lack the assets to make the payment.
Secured and Unsecured Debt in Chapter 13
If you file for bankruptcy under Chapter 13, you can often keep most of your property, even if it has been used to secure a debt obligation. That is because your court-approved Chapter 13 plan will provide for the payment of those secured debts over three to five years. The court will often allow you to reorganize your debts under the plan so that they are paid off in installments and can force creditors to accept less than you owe them.
When you file for Chapter 13 bankruptcy, you will need to show that your unsecured creditors will be no worse off than if you had filed for Chapter 7 bankruptcy and your non-exempt property turned over to the trustee. This generally means they receive at least the value of your non-exempt assets.
In Chapter 13, your unsecured creditors are generally paid with the disposable income left over after you have paid your secured creditors under the plan. The court will discharge any unsecured debt that remains after you have completed the plan.
Am I Eligible for Bankruptcy in Nevada?
Anyone who files for Chapter 7 bankruptcy in Nevada must show that they qualify by demonstrating that they lack the income to repay their debts. The Bankruptcy Court uses two means tests to determine whether you qualify.
The first means test simply looks to see if your household income is less than the median for households of the same size in Nevada. For example, U.S. Census data shows the median income for a three-person household in Nevada was $76,591 in November 2020. Therefore, if you live in a household with income of less than $76,591, you qualify for Chapter 7 bankruptcy in Nevada.
If your household income is higher than the Nevada median, you may still qualify to file under Chapter 7 if you can prove that you have little to no disposable income after you have paid your bills each month.
There is no means test for filing under Chapter 13. You only need to show you have a steady income that is large enough to cover your payments under your repayment plan. However, you cannot file under Chapter 13 if you have unsecured debts of more than $419,275 or more than $1.26 million in secured debt.
How Do I Start Bankruptcy in Nevada?
Anyone who is thinking about filing for personal bankruptcy in the U.S. must first complete a pre-bankruptcy credit counseling course that has been approved by the U.S. Trustee Program. The course is designed to help you assess whether bankruptcy really is the best solution for your debt problems. You must include a certificate stating that you completed the program within the past 180 days when you file for bankruptcy.
If you have an attorney who is representing you, the attorney will usually file for you. If you are representing yourself, you will start the bankruptcy process by downloading the correct forms for the U.S. Bankruptcy Court for the District of Nevada and following the filing instructions.
What Will Bankruptcy Cost in Nevada?
If you are filing for Chapter 7 bankruptcy, it will cost you $338 to file your case. The filing fee for a Chapter 13 case is $313. Those who cannot afford to pay the entire fee at one time can ask to pay in installments over 120 days. You can also ask the court to waive the filing fee if you earn less than 150% of the poverty line.
The cost of a personal bankruptcy attorney in Nevada can vary dramatically depending on where you live in the state and the complexity of your case. That said, it usually costs between $800 and $1,200 to hire an attorney to represent you in an uncomplicated Chapter 7 case. It typically costs more for an attorney in a Chapter 13 case and the attorneys' fees for a complicated Chapter 13 case can easily run $5,000 or more.
Looking for Help Filing for Bankruptcy in Nevada?
The personal bankruptcy process can often be complicated and confusing for those without any legal experience, which is why most people who file hire a local attorney to represent them. Your attorney will prepare the filing documents for you and defend your interests throughout the bankruptcy process. A lawyer will also ensure your bankruptcy case proceeds as smoothly as possible and that you can discharge as much debt as the law allows.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
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