An exemption in bankruptcy allows a debtor to keep certain property or assets even after bankruptcy is filed. The exemptions are defined by statute, and exempt property cannot be seized or sold to satisfy the debts of the person filing for bankruptcy.
Exemptions play a vital role in both Chapter 7 and Chapter 13 bankruptcy.
- Chapter 7: In Chapter 7 bankruptcy, exemptions help determine which property you get to keep after the bankruptcy discharge has been granted. This is how bankruptcy exemptions help you protect your property after a bankruptcy.
- Chapter 13: In Chapter 13 bankruptcy, exemptions help determine how much you will have to pay to your unsecured creditors, which can mean the difference between getting your plan confirmed and getting knocked out of Chapter 13.
Who Can File a Bankruptcy Exemption?
Any individual who files for bankruptcy can file for bankruptcy exemptions. These exemptions are available for both chapter 7 and chapter 13 bankruptcy filings, but the exact exemptions that one can file for vary from state to state. To determine what property you will get to keep if you file for Chapter 7 bankruptcy, start by making an inventory of your property, and also list each property’s replacement value. Then compare the value to your state’s exemption for that type of property. If your state offers a choice between systems, do this for each system to determine which one allows you to keep the property that matters to you.
Do All States Have the Same Exemptions?
No. Federal bankruptcy law gives discretion to each state to determine which assets a debtor is allowed to keep when a bankruptcy case is filed. A state can allow a debtor to choose between federally-created exemptions, as defined in 11 U.S.C. 522, or state-created exemptions, or a state may limit a debtor to only the state-created exemptions. A debtor is allowed to use the exemptions from only one statute, either the federal or the state, but not both. For states that provide more than one exemption statute or system, the debtor is allowed to use the exemptions from only one statute.
Which Exemption System Can I Use?
The answer to this question depends on the laws of the state that you live in. Most states prohibit their residents from taking advantage of the federal law exemption system. If you live in the state that prohibits the use of federal law exemptions, you must then use your own state’s exemption system. However, some states allow their residents to have a choice in using either the state exemption system or the federal exemption system.
What Is a Bankruptcy Exemption Limit?
An exemption limit applies to any equity you have in property and limits the amount of equity that is exempt. Equity is the difference between the fair market value of the property and the unpaid balance on the property. For example, a home valued at $500,000 with a loan of $450,000 has an equity value of $50,000. If the state's homestead exemption is $50,000 or greater, the debtor would be exempt from liquidating the $50,000 equity in the home to pay off the debts.
Other factors may affect what your limit will be, depending on where you live. Marriage may allow couples in some states to double their exemption limits. Filing with “head of household” status or having a number of dependents may also increase some exemption amounts. In some states, senior citizens may have a higher exemption limit on homestead, personal property, or other items. Disability may also raise your exemption limit, especially for motor vehicles.
What Are the Homestead and Motor Vehicle Exemption Limits in My State?
The table below lists state-specific information about homestead and motor vehicle exemptions and their limits. It also discusses state “wild card” exemptions, which can be applied to any property, as well as whether or not your state has the option to use federal exemptions. The amounts listed are for single individuals, and, as discussed above, the actual amounts may be higher for married couples, heads of household, the elderly, or those with disabilities.
|State||Federal Option?||Homestead||Auto||“Wild Card” Exemptions/Notes|
|Alabama||No||$15,000||N/A||$7,500 of “wild card” property exempt; very limited exemptions|
|Alaska||Yes||$72,900||$4,050||Amounts adjusted biannually; full value of car cannot exceed $27,000|
|Arizona||No||$150,000||$6,000||Limits on value of exempt other property|
1: Full value; limited acreage
2: $800 of real/ personal property
|N/A||Arkansas has two bankruptcy options; $200 of “wild card” property exempt|
|California has two bankruptcy options|
|Colorado||No||$60,000||$7,500||Limits on value of exempt other property|
|Connecticut||Yes||$75,000||$3,500||$1,000 of “wild card” property exempt|
|Delaware||No||$125,000||$15,000||$25,000 of “wild card” property exempt|
|District of Columbia||Yes||Full value unless it has been occupied for less than 1,215 days||$2,575||$850 of “wild card” property exempt, plus $8,075 of any unused homestead exemption|
|Florida||No||Full value; acreage limited||$1,000||$4,000 of “wild card” property exempt if no homestead exemption|
|Georgia||No||$21,500||$5,000||$1,200 of “wild card” property exempt, plus up to $10,000 of any unused homestead exemption|
|Hawaii||Yes||$20,000; up to 1 acre||$2,575|
|Idaho||No||$100,000||$7,000||$800 of “wild card” property exempt|
|Illinois||No||$15,000||$2,400||$4,000 of “wild card” property exempt|
|Indiana||No||$17,600||N/A||$9,350 of “wild card” property exempt; amounts are adjusted every 6 years|
|Iowa||No||Full value; acreage limited||$7,000||$1,000 of “wild card” property exempt|
|Kansas||No||Full value; acreage limited||$20,000|
|Kentucky||Yes||$5,000||$2,500||$1,000 of “wild card” property exempt|
|Louisiana||No||$35,000; acreage limited||$7,500|
|Maine||No||$47,500||$5,000||$400 of “wild card” property exempt, plus up to $6,000 of unused homestead exemption for certain items|
|Maryland||No||$22,975||N/A||$6,000 in cash or property, plus $5,000 in “wild card” property|
|Massachusetts||Yes||$125,000||$7,500||$500,000 homestead exemption if “Declaration of Homestead” filed|
|Michigan||Yes||$37,775||$3,475||Amounts are adjusted every three years|
|Minnesota||Yes||$390,000; acreage limited||$4,600||If home is primarily used for “agricultural purposes,” up to $975,000 may be exempt|
|Mississippi||No||$75,000; acreage limited||$10,000*||*$10,000 auto exemption also includes other items, such as household goods and cash; $50,000 of “wild card” property if filer is over 70 years old|
|Missouri||No||$15,000||$3,000||$5,000 motor home exemption; $600 of “wild card” property|
|Nebraska||No||$60,000; acreage limited||N/A||$2,500 of “wild card” property exempt|
|Nevada||No||$550,000||$15,000||$1,000 of “wild card” property exempt|
|New Hampshire||Yes||$100,000||$4,000||$1,000 of “wild card” property exempt, plus $7,000 of unused exemptions|
|New Jersey||Yes||N/A||N/A||$1,000 general personal property exemption; very few exemptions available|
|New Mexico||Yes||$60,000||$4,000||$500 of “wild card” property plus $5,000 “wild card” exemption if used in place of the homestead exemption|
|New York||Yes||Varies by county; $75,000-$150,000||$4,000||$1000 of “wild card” property if used in place of the homestead exemption|
|North Carolina||No||$35,000||$3,500||$5,000 of “wild card” property if there is an unused portion of the homestead exemption or burial exemption|
|North Dakota||No||$100,000||$2,950||$10,000 of “wild card” property if used in place of the homestead exemption; $3,750 of “wild card” property if there is no exemption used for crops/grain|
|Ohio||No||$132,900||$3,675||$1,225 of “wild card” property exempt; amounts are adjusted every three years|
|Oklahoma||No||Full value; acreage limited||$7,500|
|$3,000||$400 in “wild card” property exempt|
|Pennsylvania||Yes||N/A||N/A||$300 in “wild card” property exempt; very few exemptions available|
|Rhode Island||Yes||$500,000||$12,000||$6,500 in “wild card” property exempt|
|South Carolina||No||$58,255||$5,825||$5,825 in “wild card” property available from unused portions of other exemptions; amounts are adjusted biannually|
|South Dakota||No||Full value; acreage limited||N/A||$5,000 in “wild card” property exempt|
|Tennessee||No||$5,000||N/A||$10,000 in “wild card” property exempt|
|Texas||Yes||Full value; acreage limited||Full value of one vehicle per licensed driver|
|Vermont||Yes||$125,000||$2,500||$400 in “wild card” property exempt; up to $7,000 property exempt from any unused portions of other exemptions|
|Virginia||No||$5,000||$6,000||Any unused part of homestead exemption can be “wild card”|
|Washington||Yes||$125,000||$3,250||$3,000 in “wild card” property with some limitations|
|West Virginia||No||$25,000||$2,400||$800 in “wild card’’ property and any unused homestead/burial exemption|
|Wisconsin||Yes||$75,000||$4,000||Unused portion of personal property exemption may be used for vehicle|
What Are Some Other Common Exemptions under State Law?
The table below lists some other common exemptions that are available in various states, though it is not an exhaustive list. Exemptions contrast widely from state to state, so it is important to do research to see whether the exemptions below apply in your location. Many states have exemption limits on personal property, such as up to $1,000 worth of tools of the trade or only one animal. Some states, such as Alabama and New Jersey, have almost no personal property exemptions.
|Common Personal Property Exemptions||Common Monetary Exemptions|
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Do I Need a Bankruptcy Lawyer?
Bankruptcy is a very complicated process and it is vital to know each state's bankruptcy law. Each state allows different exemptions and filing an exemption incorrectly can lead to that property being seized, even if the property would have been exempt had the exemption been done correctly. A bankruptcy lawyer knows the ins and outs of filing for bankruptcy, and can recommend what chapter of bankruptcy is right for you. A bankruptcy lawyer can also ensure that your exemptions are filed correctly.