In any chapter 7 Bankruptcy case, exemptions ensure that the Debtor(s) are not left empty handed on the streets, however some Debtors find themselves in situations that may result in loss of the bare minimum assets that could have been protected under the requisite exemption statutes.
Although there are number of ways that a Debtor may loose exempt status on certain assets such as fraudulent transfers, one way a Debtor could loose a guaranteed exemption status would be through commingling of any such liquidated assets.
For example an individual Debtor in Oklahoma is provided with a 100% exemption on worker’s compensation claims or up to $50,000.00 on any personal injury claims under Oklahoma Statutes Title 85 and 31, respectively.
However if a Debtor converts such awards or commingles such funds with other funds in Debtor’s possession, the shield that was protecting these awards are lifted and said funds can be subject to claim by the Bankruptcy Trustee.
Therefore, it would be wise for any Debtors with such forms of exempt assets to open segregated bank accounts to keep them separated from any other personal funds to be able to show that they have not been “tainted” and to keep away from impulses to purchase anything with such funds until the completion of the bankruptcy, unless they are everyday living expenses or for purpose of purchasing other form of exempt assets such as an automobile.