Standard Property Exemptions in Bankruptcy
Bankruptcy exemptions protect your property from creditors when you file for bankruptcy. Learn about the most common exempt property here.
Most people considering Chapter 7 bankruptcy want to know what they will be able to keep if they file for bankruptcy. For the most part, what you keep depends on what are called "bankruptcy exemptions." If your property is exempt (that is, covered by a bankruptcy exemption), you get to keep it. If it's not exempt, the bankruptcy trustee is likely to sell it and use the proceeds to pay your creditors.
What property is exempt varies widely from state to state. Some states allow bankruptcy filers to use a exemptions set forth by federal law, called the federal bankruptcy exemptions. Most states don't allow filers to use the federal bankruptcy exemptions.
To learn about bankruptcy exemptions, how they work, which state exemption system you can use, and whether your state allows the federal bankruptcy exemptions, and to get a link to your state's specific exemptions, see Bankruptcy Exemptions -- What Do I Keep When I File for Bankruptcy?
Common Types of Property Exemptions
Here are some of the types of property that your state may exempt. Sometimes, the state exempts the entire value of the property, regardless of value. Other times, the state will place a cap on the amount that is exempt. For example, it might exempt $3,500 of the value of your car.
Homes and other real property. This is called the homestead exemption. To learn more, see Chapter 7 Homestead Exemption.
Motor vehicles. Most states exempt some equity in a vehicle.
Clothing, household items, food, books. Many states provide a cap as to how much you can exempt for these types of items.
Jewelry. Many states exempt up to a certain amount of jewelry. Often the entire value of wedding rings are exempt.
Child support and alimony. Many states provide an exemption for child support and alimony.
Crime victim compensation. Most states exempt money you received from the government because you were the victim of a crime.
Insurance. Most states exempt certain types of insurance, such as group life, life insurance, fraternal benefit society benefits, and the like.
Public benefits. Most states allow you to keep Social Security, disability payments, unemployment benefits, and other types of public benefits.
Retirement accounts. In every state, you can exempt tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans). You can exempt a combined total of up to $1,245,475 of all IRAS and Roth IRAs.
Tools of the trade. Many states allow an exemption up to a certain amount for equipment, tools, and other items you use in your profession or trade.
Wages. Most states exempt a portion of your recent wages. If those exempt wages are in your bank account, that money is protected.
Wildcard. Some states provide a wildcard exemption – an exemption of a certain dollar amount that can be applied to any property you want to keep. (For more information on the wildcard, see How to Use the Wildcard Exemption in Bankruptcy.)
Wrongful death and personal injury payments. Many states exempt money you received within a certain period of time prior to your bankruptcy that was the result of a wrongful death or personal injury lawsuit or settlement.
Others. There may be other exemptions that would allow you to keep money in your checking or savings accounts. Read through your state's exemptions carefully.
To find out what is exempt in your state, check out our Bankruptcy in Your State page. Click on your state to find an article listing your state's bankruptcy exemptions. If you can select the federal bankruptcy exemptions in your state, you can find those amounts here.