Clothes were the first type of property you were allowed to keep in a bankruptcy
August 26, 2010 Leave a comment
Bankruptcy exemptions are what allow you to keep property in a bankruptcy. We have very generous exemptions here in California and you can keep a lot of property in a bankruptcy but the question is how did this all start.
The very first exemption allowed in bankruptcy was for your clothes. It used to be that creditors could take everything from you in a bankruptcy to satisfy your debts. That included your clothes. Then laws were passed in England in the 1800s that mirrored English common law that allowed you to keep your clothes in order to prevent breaches of the peace caused by naked people walking the streets.
Public nudity was illegal then as it is now. Laws had to be passed to allow people to keep their clothes so that they would not be forced to break the law after they went bankrupt.
Pots and pans, personal items, and tools of the trade were also allowed to be kept by debtors so they could cook and earn money to live. These exemptions were gradually expanded until we have the generous exemptions of today where your clothes, furnishings, equity in your home, car, tools of the trade, jewelry, retirement funds, and other property can be kept in a bankruptcy. We also have a wildcard exemption that allows $23,000 of any kind of property to be protected.
It all started though in old England with naked people walking the streets after losing the shirt off their backs because of their bankruptcy. Fortunately things have changed for the better.