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Bankruptcy: Delaware

Filing bankruptcy in Delaware provides honest debtors the opportunity to find relief from crippling debt and allows creditors to receive some repayments based on the value of the debtor’s property or reliability of earnings.  4,229 bankruptcies were filed in Delaware in 2010, ranking Delaware 23rd in the nation for the number of bankruptcy filings per capita.  73% of Delaware’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Delaware

Bankruptcy in Delaware is governed by federal law and all bankruptcy cases are initiated in the US Bankruptcy Courts in Wilmington. Although federal courts have exclusive jurisdiction over bankruptcy proceedings, Connecticut law permits petitioners to use the exemptions found in the U.S. bankruptcy code or the exemptions provided under Connecticut law. The exemption systems cannot be mixed and matched. With the guidance of a bankruptcy attorney Connecticut petitioners can gain a full understanding of what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Delaware

Chapter 7 bankruptcies in Delaware are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who don’t have a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Delaware’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Delaware’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Delaware Bankruptcy Exemptions

Delaware’s state laws designate specific property exemptions that allow debtors to keep certain personal property and assets so they can move forward and be productive members of society. Bankruptcy law in state of Delaware allows debtors to choose exemptions from the state or federal lists.

Property exemption amounts are subject to change and are no longer updated in the state statutes, so it is imperative that a Delaware bankruptcy attorney is consulted before making such a decision of this magnitude.  Delaware’s key exemptions include:

Delaware Homestead Exemption

  • Equity in real property or a manufactured home that is debtor’s principal residence not to exceed $75,000 in 2010, $100,000 in 2011, and $125,000 in 2012;
  • $125,000 total: for persons totally disabled from working or married persons where at least one of the spouses is 65 years old or older (Husband and wife may not double)

Delaware Tenancy by Entirety Exemption

  • Property held as tenancy by the entirety may be exempt against debts owed by only one spouse

Delaware Personal Property Exemption

  • $25,000 total: Personal property and/or equity in real property, other than the debtor’s principal residence
  • $15,000 total: Motor vehicle if necessary for employment
  • Clothing and jewelry
  • Principal and income of spendthrift trusts
  • College investment plan account ($5,000 limit for year prior to filing, or average of past two years’ contribution, whichever is more)
  • Bible, books, family pictures and sewing machines
  • Pianos and leased organs
  • Church pew or any seat in public place of worship and Burial plot

Delaware Tools of Trade Exemption

  • $75 total In New Castle and Sussex Counties, and $50 total in Kent County: for Tools, implements and fixtures
  • $15,000 total: Vehicle necessary for purposes of employment
  • $15,000 total: Vehicle and/or tools of trade necessary for purposes of employment

Delaware Wage Garnishment Exemption

  • 85% of earned, but unpaid, wages

Delaware Public Benefits Exemption

  • Aid to aged, disabled, general assistance
  • Aid to blind
  • Workers’ and Unemployment compensation
  • Crime victims’ compensation

Delaware Insurance Exemption

  • $350 per month: Annuity contract proceeds
  • Health or disability benefits
  • Fraternal benefit society benefits
  • Group life insurance policy or proceeds
  • Life insurance proceeds or avails; Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors

Delaware Pensions and Retirement Savings Exemption

  • Kent County and state employees
  • Volunteer firefighters and Police officers
  • IRAs, Roth IRAs 401(k)s and other retirement plans

Delaware Miscellaneous Exemption

  • Partnership property not exempt under new RUPA

Delaware Wild Card Exemption

  • $500 total: Any personal property if head of family, except tools of trade

Chapter 13 Bankruptcy, Delaware

In 2010, 27% of debtors petitioned for protection under Chapter 13 bankruptcy laws in Delaware.  When a petitioner files Chapter 13 bankruptcy in Delaware, a court-appointed Trustee works on behalf of the petitioner to reorganize debts and develop a 3-5 year repayment plan, by which creditors are repaid using the debtor’s future earnings.  Chapter 13 petitioners keep most – or all – of their property.

How to File Bankruptcy in Delaware

Eligibility for property exemptions may have a considerable impact on your decision to file for bankruptcy. The goal is to find a solution that will allow you to keep your major assets and qualify your debts for discharge.  Every case is unique, and a Delaware bankruptcy attorney can help debtors review their financial facts and decide whether Chapter 7 or Chapter 13 bankruptcy is the best option in their situation.

Bankruptcy Attorney: Delaware

It is the debtor’s responsibility to know their rights and obligations as bankruptcy petitioners.  A Delaware bankruptcy attorney can break down and explain the federal laws and state exemptions for those considering bankruptcy protection.  Because personal bankruptcy cases can be incredibly complex and worrying, the bankruptcy assistance and counsel of a Delaware bankruptcy attorney is a wise investment.