When you file for bankruptcy under Chapter 7 or Chapter 13, you have to complete a packet of forms and file them with the court. Schedule C is one of the most important forms you have to file: It tells the court and your creditors what property you claim as exempt under state or federal law.
How Exemptions Work
Every state has a list of exempt property: property that creditors can't take from you. When you file for bankruptcy under Chapter 7, you get to keep your exempt property. The bankruptcy trustee can take any property that is not exempt, sell it, and distribute the proceeds to your creditors. But the trustee can't touch your exempt property. The exemption lists in most states include at least some equity in a home, a vehicle, personal belongings (such as clothing, furnishings, and jewelry), and the tools of your trade. For information on exemptions -- and links to every state's list of exempt property -- see Bankruptcy Exemptions - What Do I Keep When I File for Bankruptcy?
If you file under Chapter 13, you don't stand to lose any property, whether or not it's exempt. Instead of using your nonexempt property to repay your creditors, you use your income to fund a three-to five-year repayment plan. However, exemptions are still important in a Chapter 13 case. If you use Chapter 13, you must repay your creditors at least as much as they would have received if you had used Chapter 7. In other words, you must repay them at least the value of your nonexempt property.
Information for Schedule C
On Schedule C, you tell the trustee, the court, and your creditors what property you are claiming as exempt. Exemptions aren't automatic: You have to claim them on this form in order to take advantage of them. Be as thorough and accurate as possible in claiming exemptions. The more property you are able to claim as exempt, the more property or income you will get to keep in your bankruptcy case.
Listing Each Item of Property
In the first column of Schedule C, list each item of property. (For items of low value, such as kitchen items or clothing, you can lump them together.) Use the real property you listed on Schedule A and the personal property you listed on Schedule B to make sure you don't forget anything.
Citing to the Applicable Exemption Law
In the second column, you'll need to insert the citation to the state or federal law that provides the exemption. In some states, you may choose between the state's exemption list or the federal exemption list; however, you can't mix and match some exemptions from one list and some from the other. Some states allow you to use only the state exemptions. Uniquely, California allows you to choose between two lists of state exemptions. For links to each state's exemption list -- with the citations you will need to complete this column -- as well as information on the federal exemption list, see Bankruptcy Exemptions - What Do I Keep When I File for Bankruptcy?
Claiming the Exemption Amount
In the third column, you put the amount of the exemption your are claiming. Often, an exemption will allow you to protect up to a certain value or equity in your property. Some exemptions allow you to exempt certain types of property entirely, such as your clothing or your wedding ring. In this column, you usually list either the value of your property (from the fourth column) or the maximum value of the exemption, whichever is less.
Listing the Replacement Value for Each Item of Property
In the fourth column, list the current replacement value of the property: what it would cost to buy the same item, in the same condition and of the same age. (To learn more about how to value your property, see Completing the Bankruptcy Forms.)