Nevada’s Wildcard Exemption, Explained

Most people who declare bankruptcy end up finding that the process is much more complicated than it initially sounds. One of the most important steps of the bankruptcy process is applying exemptions to your assets. Failure to do so can have negative repercussions that could make your filing a waste. If the trustee assigned to your case discovers unprotected assets, they can be sold at a bankruptcy auction. Here, the proceeds are distributed to pay creditors, but the trustee also gets to keep a portion as payment for their work on the case. Additionally, Nevada is one of the states that does not allow bankruptcy debtors to opt into the federal bankruptcy exemption system. Thankfully, Nevada does offer a wildcard exemption to residents needing debt relief. Read on for a deep dive into Nevada’s wildcard exemption in bankruptcy. To schedule your free consultation with an experienced member of our Henderson bankruptcy team, call 702-899-3328.

What is the Wildcard Exemption?

A wildcard exemption is a legal protection that a bankruptcy debtor can apply to any asset they wish. Nevada has an extensive list of assets available to debtors, such as the homestead exemption, household goods and furnishings exemption, etc. But many people have assets that do not fall into the categories specifically prescribed by Nevada bankruptcy law. Or, they may have more than one of a certain category of asset when the exemption only protects a single item. Nevada’s wildcard exemption is $10,000, which can be doubled for married couples filing bankruptcy jointly to $20,000. It can only be applied to one asset, so a Henderson bankruptcy debtor should conduct a thorough inventory of their assets before deciding which one most needs protection from the wildcard exemption.

Digital Assets

As technology progresses, more and more people invest their funds in ways that previous generations never would have imagined. There is no Nevada bankruptcy asset to protect cryptocurrency and other digital assets, so if you have them, this could be a good use for your wildcard exemption. The wildcard exemption could also be used to protect your stock options, fractional shares, or brokerage account. These are the types of assets that are fairly easy for a bankruptcy trustee to locate and liquidate. The question here will be whether it is worth it to apply the wildcard exemption to digital assets, or if the debtor has another more valuable asset that needs its protection.

Excess Vehicle Equity

Nevada’s motor vehicle exemption only protects $15,000 of equity in a vehicle. The debtor can protect a vehicle worth more than $15,000, but they must have enough remaining on the loan to bring it within the exemption limits if they wish to fully protect the vehicle in bankruptcy. The trustee can seize an asset that is only partially covered by an exemption and sell it, and the debtor will receive the exemption amount, but the rest is used to pay creditors. So if you have a vehicle that wouldn’t be fully protected by Nevada’s motor vehicle exemption, this could be a good use for your wildcard exemption. The inconvenience of losing your vehicle could bring the costs higher than the sticker value of the wildcard exemption being applied to a different asset.

Excess Home Equity

The same concept of unprotected equity in bankruptcy applies to a mortgaged home as a financed vehicle. But Nevada’s homestead exemption is $605,000, so the wildcard exemption only covers a narrow additional window of equity in bankruptcy. Some debtors will also take equity out of their home and use it on reasonable expenses and protectable assets so they can save the home and the wildcard exemption for another asset. This works best when the debtor begins preparing for their bankruptcy filing well in advance. If they have enough time to satisfy the 120-day rule, home equity can be withdrawn and deposited into a retirement savings account. Otherwise, the debtor could spend those funds on reasonable expenditures like:

Stocking up on non-perishable foods, cleaning supplies, and other household goods
Paying your bankruptcy attorney’s fees up-front
Vehicle maintenance and repair
Household maintenance and repair
Dental and medical appointments
Stocking up on clothing (not luxury brands), school supplies, and other items for your children
Gifts under $600
A new vehicle, especially if you want to surrender your current vehicle in bankruptcy

Tax Refund

An Earned Income Tax Credit is generally safe in the bankruptcy process, but all other tax refunds are not. Tax refunds are simple for a trustee to intercept and use to pay bankruptcy debts. In chapter 7 bankruptcy, a debtor can wait until they receive their tax refund and spend it on reasonable things (see the list above) before filing for bankruptcy. Chapter 13 bankruptcy lasts 3-5 years, and the trustee can take the debtor’s tax refund each of those years. If the debtor is in a rush to file for chapter 7 bankruptcy and can’t wait to receive and spend their refund, or will lose their refund each year in chapter 13 bankruptcy, they can apply their wildcard exemption to save those funds. Here, the debtor should find a reasonable estimate of what their refund will be to make sure they don’t have a more valuable asset better suited for the wildcard exemption.

Miscellaneous Assets

After reading through Nevada’s bankruptcy exemptions, you may find that you have at least one item that doesn’t meet the description of any exemptions, or that you have too many of that item. This is a common occurrence for collectors. You can either stack the wildcard exemption on top of an existing exemption to protect an asset, or use the wildcard exemption independently if there is no existing applicable exemption. But if you have a priceless watch, and irreplaceable piece of art, a beloved firearm, or another exemption that isn’t currently protected by an exemption, this is where you should apply your wildcard exemption. This is especially true if you plan to file for chapter 7 bankruptcy. If you have more miscellaneous assets that can be protected by the bankruptcy exemption, you should check if you qualify for chapter 13 bankruptcy instead. Here, the debtor can keep unprotected assets, although their value can affect how much they must pay each month for their payment plan.

Have Your Bankruptcy Questions Answered by an Experienced Henderson Debt Relief Lawyer

When exemptions aren’t properly applied in a bankruptcy case, it can have disastrous results. The risk of making this mistake shoots up when a debtor chooses to file for bankruptcy, serving as their own attorney. The costs of legal representation in bankruptcy can be intimidating, but the costs of errors throughout a bankruptcy filing can be far more costly in the long run. Our office offers flexible post-filing payment options so you can have the ease of mind knowing your case is being handled by a competent professional, and you will pay in affordable installments after like burdens like wage garnishments and interest payments have been eliminated. See if you qualify, make sure you’re eligible for bankruptcy, and get the rest of your questions answered without leaving the comfort and privacy of your own home. Schedule your free phone consultation with Henderson Bankruptcy Lawyers today by calling 702-899-3328.