Lawyer Listings Add, Update, or Remove Listings

Bankruptcy Exemptions

The property a person filing bankruptcy keeps - the home equity, vehicle, household goods, tools, retirement accounts and other assets the law places beyond the reach of the trustee and creditors - and the state-by-state choice of which exemption list applies.

Informational only - this is not legal advice. These definitions explain general legal vocabulary in plain English. They are not advice about your situation, reading them creates no attorney-client relationship, and the law differs from state to state and changes over time. For advice you can rely on, speak to a lawyer licensed in your state.

What it means

Bankruptcy does not take everything. When a case is filed, all of the debtor's property becomes the bankruptcy estate, and the debtor then claims exemptions: categories of property, each up to a value fixed by statute, that are removed from the estate and kept. In a Chapter 7 case the trustee may sell only non-exempt property; in a Chapter 13 case the debtor keeps everything, but the value of what would have been non-exempt sets a floor on what the plan must pay unsecured creditors. Most consumer cases are "no-asset" cases in which every item of property is exempt and the trustee distributes nothing.

Federal law provides one list of exemptions, but it also allows each state to opt out and require its residents to use the state's own list instead. Most states have opted out; a minority let the debtor choose between the federal and state lists. The lists differ substantially - in whether a homestead exemption protects a fixed dollar amount of equity or an unlimited amount, in how vehicles and wages are treated, and in "wildcard" exemptions that can be applied to any property - so which state's law applies is often the single most consequential fact in a case. A person who moved recently is governed by a look-back rule that may send them to a former state's exemptions, precisely to stop people moving to a generous state before filing.

Retirement funds in tax-qualified plans and IRAs are protected under federal law regardless of which list applies, subject to a cap on IRAs. An exemption protects equity, not the property itself: a house with a mortgage larger than its value has no equity to exempt, and keeping it is a question of continuing to pay the lender, not of exemptions. A trustee or creditor may object to a claimed exemption within a period fixed by the rules, and an objection not made in time is waived even if the exemption was wrong.

Where this comes from

The federal exemption list is 11 U.S.C. § 522(d), with the state opt-out at § 522(b)(2) and the domicile look-back rule at § 522(b)(3)(A). Retirement funds are protected by § 522(b)(3)(C) and (d)(12), with the IRA cap at § 522(n); Clark v. Rameker, 573 U.S. 122 (2014), holds inherited IRAs outside the protection. The homestead limits for recently acquired homes are at § 522(o)-(q). Objections to exemptions are governed by Federal Rule of Bankruptcy Procedure 4003; Taylor v. Freeland & Kronz, 503 U.S. 638 (1992), holds an untimely objection barred, and Schwab v. Reilly, 560 U.S. 770 (2010), construes what a claimed exemption covers. Dollar limits in § 522 are adjusted periodically and every state list is its own; none is stated here.

When people hire a lawyer for this

Exemption planning is legitimate and it is where a bankruptcy lawyer earns the fee: which list applies, how to value a vehicle or a home, whether to convert non-exempt cash into an exempt form before filing and how far that can go before it becomes a fraudulent transfer, and how to schedule every asset so that nothing is omitted - an undisclosed asset is not protected by any exemption and can cost the discharge. A person who has moved between states in the last few years should raise that first, because it may change everything else.

Find a lawyer for this in your state

Choose your state. Each link opens the directory page for the city in that state with the most currently published law firms in this practice area; a +n beside the city is how many other cities in the state also have one. The list is generated when this page loads, so a state whose listings have lapsed drops out rather than becoming a dead link.

« All glossary terms

Part of the LawyerLand plain-English legal glossary. Definitions are written from primary sources - statutes and court rules - and each entry states the authority it rests on, or says plainly when the doctrine is state law with no national rule.

If you cannot afford a lawyer, civil legal aid programmes provide free help with many of these problems: civil legal aid programmes by state.

Related free reference tools: statute of limitations for a personal-injury claim, by state, quoted from each state's official text - part of LawyerLand's legal reference tools.