A debtor who files bankruptcy under federal law must follow 11 U.S.C. 522 when claiming exemptions. Some of the major exemptions that may be available to a person filing bankruptcy under federal law are listed below, with a brief description of each exemption. A lawyer should be consulted to determine the particulars of each exemption and to determine all available exemptions that may be filed.

Note: The federal exemptions are adjusted for inflation every few years. The next inflation adjustment is scheduled for 2016. This article was last updated in March of 2014.

  • Homestead (equity in dwelling used as residence)
    – Up to $21,625 in value
  • Equity in automobile
    – Up to $3,450 in value in one motor vehicle
  • Personal property
    – Household items (Animals, appliances, furniture, clothes, etc.), up to $550 each item totaling $11,525 in value
    – Jewelry and heirlooms: up to $1,450 in value
  • Tools of the trade
    – Up to $2,175 in value
  • Insurance
    – Disability benefits
    – Unmatured life insurance is also usually exempt
  • Pensions
    ERISA qualified benefits needed for support
    – Amount reasonably necessary for support of debtor and dependants
  • Public benefits
    – Unemployment
    Workers compensation
    – Public assistance
    Social security
    – Veteran’s benefits
  • Alimony and child support
    – Amount reasonably necessary for support of debtor and dependents
  • Wildcard
    – Up to $1,150 plus up to $10,825 of any unused amount in the homestead exemption

Are the Federal Bankruptcy Exemptions Used in Every Court?

No. Some states only use the federal bankruptcy exemptions. Other states refuse to use the federal bankruptcy exemptions and use their own state exemptions instead. A third group of states give debtors the ability to choose between the federal exemptions and the state exemptions.

Bankruptcy exemptions are unique in the Bankruptcy Code because it is the only part of the Code which allows states to control what happens during bankruptcy. All other bankruptcy laws are written by Congress.

How Does the Wildcard Exemption Work?

The wildcard exemption can be used by the debtor to save any property, including property not covered by the other exemptions. The catch is that the debtor can only save up to $1,150 plus unused value of the homestead exemption. The unused value of the homestead exemption cannot exceed $10,825 though.

Suppose a debtor wants to save his second car from bankruptcy. The car is worth $5,000. If the debtor only uses $17,000 to save his house, the debtor would have $4,625 left to save his second car. Of course, the remainder of the homestead exemption is not enough to save the $5,000 car. If we add $4,625 to the $1,150 provided by the federal exemptions though, then the debtor could save the car and still have $775 left over to save other property, like his gun collection.

Note that if the debtor uses all $21,625 to save his home, the debtor still gets to use the $1,150 given to him. In other words, the federal bankruptcy exemption system gives all debtors the right to protect up to $1,150 of property not already protected by the other exemptions.

Do I Need a Bankruptcy Lawyer?

Bankruptcy is a very complicated process and filing an exemption incorrectly can lead to that property being seized, even if the property would have been exempt had the exemption been filed correctly. A bankruptcy lawyer knows the ins and outs of filing for bankruptcy, and can recommend what chapter of bankruptcy is right for you, ensuring that your exemptions are filed correctly.