Federal Bankruptcy Exemptions

Find out which states allow bankruptcy filers to use the federal bankruptcy exemptions instead of state exemptions and the current federal bankruptcy exemption dollar amounts.

Bankruptcy filers don't lose everything when filing for bankruptcy. You'll use bankruptcy exemptions to protect the property you'll need to maintain employment and a home. Most filers must use state exemptions, but if you live in one of seventeen states or the District of Columbia, you'll choose between federal and state exemptions—whichever works best to protect your assets. In this article, you'll learn:

  • if you can choose between your state's exemptions and the federal bankruptcy exemptions
  • what will happen to property you can't protect with an exemption, and
  • where to find more information.

If you'd like to check for other common issues in your bankruptcy case, try using the ten-question bankruptcy quiz—it will flag areas you'll want to look into further. Or, if you'd like an exemption overview, read Bankruptcy Exemptions – What Can I Keep When I File for Bankruptcy?

States Allowing Federal Bankruptcy Exemptions

These states and the District of Columbia allow debtors to choose between their state system and the federal bankruptcy exemptions.

Alaska New Jersey
Arkansas New Mexico
Connecticut New York
District of Columbia Oregon
Hawaii Pennsylvania
Kentucky Rhode Island
Massachusetts Texas
Michigan Vermont
Minnesota Washington
New Hampshire Wisconsin

Choosing Between State and Federal Bankruptcy Exemptions

You can't mix and match exemptions from the two different systems, so you must determine which set of exemptions will be best for you. Start by making a property list with a space for the value of each item. Then compare the type and amount of property you can keep under each system. Pick the set that protects the most meaningful or valuable assets.

Current Amounts for Federal Bankruptcy Exemptions

Before you get started, here are a few things you'll want to know:

  • If the exemption doesn't include a dollar amount, you can keep the entire asset regardless of its value.
  • If you and your spouse both file for bankruptcy (called a "joint" filing), you can double the exemption amount on any property you own together. For example, spouses who co-own their home can claim a $50,300 homestead exemption—double the $25,150 homestead exemption amount.
  • The amounts are valid through March 31, 2022, and adjust every three years on April 1 to reflect changes in the Consumer Price Index.
  • All code references are to 11 USC (Title 11 of the United States Code).

Federal Bankruptcy Exemptions

Federal bankruptcy exemption amounts will adjust on April 1, 2022.

Homestead Exemption

  • $25,150 individuals
  • $50,300 for spouses who co-own property
  • tenancy by the entirety protection allowed in some jurisdictions

11 USC § 522(d)(1)

Motor Vehicle Exemption

  • $4,000

11 USC § 522(d)(2)

Tools of Trade Exemption

  • $2,525

11 USC § 522(d)(6)

Wildcard Exemption

11 USC § 522(d)(5)

Personal Property Exemptions

  • $625 per item / $13,400 total for animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments.
  • jewelry up to $1,700
  • health aids
  • lost earning payments
  • personal injury recoveries to $25,150 (excludes pain and suffering and pecuniary loss)
  • wrongful death recoveries for a person on whom you depended
  • alimony and child support needed for support

11 USC §§ 522(d)(3)-(6),(9)-(11)

Retirement Accounts

  • tax-exempt retirement accounts
  • IRA and Roth IRA up to $1,362,800

11 USC § 522(b)(3)(C),(b)(3)(C)(n)

Public Benefit Exemptions

  • public assistance
  • Social Security benefits
  • Veteran's benefits
  • unemployment compensation
  • crime victim's compensation

11 USC §§ 522(d)(10)(A),(11)(A)

Insurance Exemptions

  • unmatured life insurance policy except for credit insurance
  • life insurance policy with loan value up to $13,400
  • disability, unemployment, or illness benefits
  • life insurance payments for a person you depended on that you need for support

11 USC §§ 522(d)(7),(8),(10)(C),(11)(C)

Where to Find Statutes

United States Code

What Happens to Property You Can't Exempt Using State or Federal Bankruptcy Exemptions?

It will depend on the chapter you file. In Chapter 7 bankruptcy, you lose property not covered by an exemption. The bankruptcy trustee responsible for managing your case will sell the property for the benefit of your creditors. In Chapter 13 bankruptcy, you can keep all of your property; however, that luxury comes at a price—literally. You'll pay your creditors the value of any property not covered by an exemption in your Chapter 13 repayment plan.

For example, say you own a car outright worth $3,000, and your state has a vehicle exemption of up to $5,000. Here's what would happen in each chapter.

  • Chapter 7 Bankruptcy. If you file for Chapter 7 bankruptcy, you will get to keep your car because the exemption would protect the equity fully. In the same example, if your vehicle were worth $15,000, the bankruptcy trustee would sell your vehicle, pay you $5,000 for the exemption, and distribute the rest to your unsecured creditors.
  • Chapter 13 Bankruptcy. In Chapter 13, you wouldn't need to pay extra to your creditors through your repayment plan. However, if the car were worth $15,000, you'd need to pay your creditors at least $10,000 (minus sales costs) through your plan.

Keep in mind that these examples don't take into account a vehicle loan. You'll find more information below.

Protecting a Financed Home or Car Using State or Federal Bankruptcy Exemptions

Many people wonder if they can wipe out a home mortgage or car loan and keep the property without paying anything more. The simple answer is "No." Protecting the equity with an exemption will stop the Chapter 7 trustee from selling it, and you won't have to pay extra to keep it in Chapter 13, but there are more steps to take.

First, in a Chapter 7 case, the mortgage or car payment will need to be current. Second, you'll need to be able to continue to make the payment. Why? Because when you purchased it, you gave the lender a property "lien." The lien created a secured debt that allows the lender to take back the property if you don't pay as agreed—even in bankruptcy. So if you're behind on the payment and file for Chapter 7, you'll lose the property. Instead, consider catching up on arrearages in Chapter 13.

For more information, learn how mortgages work in bankruptcy and how to file for bankruptcy without losing a car.

State and Federal Bankruptcy Exemption Timing Rules

It's tempting to move to a state with significantly more generous bankruptcy exemptions when filing for bankruptcy. But it likely won't do much good. To prevent people from abusing the system, filers must live in the state for at least two years—otherwise, they must use the previous state's exemptions. Here's how it works.

  • If you've made your permanent home (your "domicile") in your current state for at least two years, you can use the state's exemptions (or the federal exemptions if allowed).
  • If your domicile hasn't been in the same state for two years, the rules get more complicated, so prepare yourself. In fact, it sounds so strange we'll explain it in three different ways so that you know you didn't read it wrong. Here goes: You'll choose the state that you lived in the longest during the 180 days immediately before the two years before filing.

Did you get that? If not, here's a way to figure it out. Count back two-and-a-half years. Then ask yourself where you lived the longest during the first six months of that two-and-a-half-year period.

Still confused? Let's try an example. Suppose you planned to file on January 1, 2022. Your two-and-a-half-year period would start July 1, 2019, and you'd qualify to use the exemptions of whichever state you resided in the most during the July 1, 2019, through December 31, 2019 period. You wouldn't have to file your case there, but you'd use that state's exemptions. Hopefully, that helps!

Special Homestead Exemption Rules

The homestead exemption protects your ownership interest in the home in which you reside. You'll need to read your state's homestead statute to determine the specifics, such as the amount of equity and acreage covered, whether the exemption protects a manufactured home and if you need to file a homestead exemption with the county clerk. Also, you'll need to comply with a federal timing law—here's the rule:

You must live in the home for more than 40 months before filing for bankruptcy. Otherwise, your homestead exemption is capped at $170,350 if you file on or after April 1, 2019 (the amount changes every three years). This cap won't apply if you bought your home with home sales proceeds from that state.

Find out more in Chapter 7 Homestead Exemption in Bankruptcy.

Navigating Your Bankruptcy Case

Bankruptcy is an unusual area because it's essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can't skip a step.

One way to keep track of your research is to use the bankruptcy forms as an outline. You'll find links to the exemption-related bankruptcy forms and other exemption resources in the chart below. You can also look at the list of Chapter 7 and 13 bankruptcy forms to see where this topic fits in the bankruptcy scheme. And this handy bankruptcy document checklist will help you gather the things you'll need to complete the petition.

Bankruptcy Exemption Information

Bankruptcy Forms

Schedule A/B: Property

Schedule C: The Property You Claim as Exempt

Statement of Intention for Individuals

Related Information

What Happens to Your Property in Bankruptcy?

The Motor Vehicle Exemption

The Wildcard Exemption

Chapter 7 Homestead Exemption

Exemptions in Chapter 13 Bankruptcy

Need More Info?

We want to help you find the answers you need. Go to TheBankruptcySite for more easy-to-understand bankruptcy articles, or consider buying a self-help book like The New Bankruptcy by Attorney Cara O'Neill.

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by consulting with a local bankruptcy lawyer.

Updated October 7, 2021

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