What Can I Keep If I File Chapter 7 in Oklahoma?

The first question almost everyone asks me about Chapter 7 is whether they will lose their stuff. For most Oklahomans the honest answer is no. Chapter 7 gets called liquidation bankruptcy, and the name scares people. In practice, most people who file Chapter 7 keep everything they own.

That is because of exemptions. An exemption is a category of property the law protects from creditors. Oklahoma has its own list, and people who live here have to use it, because the state has opted out of the federal list. 31 O.S. § 1(B).

Your home

Oklahoma protects the home that is your principal residence, and the statute puts no dollar cap on it. 31 O.S. § 1(A)(1). A manufactured home you live in gets the same protection. § 1(A)(2). There are acreage limits, and federal law can limit the protection if you bought the house recently, so this is one of the first things I look at.

One thing Chapter 7 does not do is catch you up on a mortgage. If you are behind on house payments when you file, you are still behind when the case closes, and the lender can foreclose. If saving the house is the goal, Chapter 13 is usually the better tool.

Your car

Oklahoma protects up to $7,500 of your equity in one motor vehicle. § 1(A)(13). Equity is what the car is worth minus what you still owe on it. A $20,000 truck with an $18,000 loan has $2,000 in equity, well inside the exemption. If you are still paying on the vehicle, you keep it by keeping the payments current, and we will talk through whether reaffirming the loan makes sense.

Your paycheck

Oklahoma protects 75 percent of the wages you earned in the 90 days before filing. § 1(A)(18).

Retirement accounts

Qualified retirement plans are protected, including 401(k) plans, 403(b) plans, traditional and Roth IRAs, and pensions. § 1(A)(20). This one matters more than people realize. I have met people who emptied a 401(k) trying to pay credit cards they could have discharged, and the money they pulled out was money the law would have let them keep. Do not cash out retirement to pay debts until you have talked to a bankruptcy lawyer.

Everything else in the house

Household and kitchen furniture, including a personal computer, is protected with no dollar cap. § 1(A)(3). The list also covers up to $4,000 in clothing, § 1(A)(7); up to $3,000 in wedding and anniversary rings, § 1(A)(8); tools of your trade up to $10,000, § 1(A)(5); prescribed health aids, § 1(A)(9); and guns held for personal or household use up to $2,000, § 1(A)(14). Your earned income tax credit is protected, § 1(A)(23), and so is a personal injury claim up to $50,000 in net value, not counting punitive damages. § 1(A)(21).

What can be at risk

Oklahoma has no general catch-all exemption. So cash in the bank that does not trace to protected wages, a second vehicle with real equity, a boat, a lake lot, collectibles, and investment accounts outside a retirement plan are the kinds of things a Chapter 7 trustee looks at.

Owning something unprotected does not mean you cannot file. It means we plan for it. Sometimes the answer is timing. Sometimes it is Chapter 13. And sometimes the property is worth less than people assume once the costs of selling it are figured in.

Getting it right

The exemption analysis is the part of a bankruptcy most worth getting right. It turns on what you own on the day you file, how you hold it, and sometimes what you did with property in the years before. Those are questions to answer before the petition is filed, not after.

If you are thinking about Chapter 7, let's go through what you own and what the law protects. Call (918) 221-6190 or request a consultation. The first consultation is free, and you will talk with me directly, not a screener.

This article is general information about Oklahoma and federal bankruptcy law, not legal advice for your situation. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.