What Is the Difference Between Federal and State Bankruptcy Exemptions?

Posted on in Bankruptcy


If you are considering filing for bankruptcy, you might be wondering what will happen to your money and property. Will you lose everything you have worked so hard for? Depending on the type of bankruptcy you file, you may be required to turn over certain assets. In a Chapter 7 bankruptcy, you may receive a discharge of most of your debts, but the bankruptcy trustee may seize some of your assets and liquidate them in order to repay some of what you owe to creditors. Fortunately, exemptions apply to your property, and you will be able to keep any assets that are exempt. However, determining whether to use exemptions that are available under federal or state laws can sometimes be difficult.

Federal Bankruptcy Exemptions

Under federal law, certain types of assets are exempt from bankruptcy. The federal exemptions are updated every three years, and the most recent update went into effect on April 1, 2022. Some examples of the current federal exemptions include:

  • Homestead exemption: You can exempt up to $27,900 of equity in your primary residence.

  • Vehicle exemption: You can exempt up to $4,450 of equity in one motor vehicle. 

  • Personal property exemption: You can exempt property such as home furnishings, clothing, books, or musical instruments, with a limit of $700 per item and a total exemption of $14,875.

  • Tools of the trade: You can exempt up to $2,800 of tools you need for your job, such as construction equipment or a computer. 

  • Jewelry: You can exempt items valued at up to $1,875.

  • "Wild card" exemption: For assets that do not fall into another category, you can use an exemption of up to $1,475. If you did not use the full amount of your homestead exemption, up to $13,950 of that exemption may be applied to other assets.

  • Retirement savings: You can exempt most or all of your 401(k), 403(b), or pension account. 

State Bankruptcy Exemptions

In addition to the federal bankruptcy exemptions, each state has its own set of exemptions. Depending on the state where you live, you may be able to choose between the federal or state exemptions, or you may be required to use the state's exemptions. In some cases, state exemptions are more generous, and they may provide you with the ability to keep more of your assets. For example, in Texas, an unlimited homestead exemption is available in most cases, meaning that the full amount of equity you own in your home may be exempt. Texas also allows for aggregate exemptions of up to $50,000 for an individual or $100,000 for a family, and you may be able to exempt your household furnishings, a vehicle for each member of your family with a driver's license, and multiple other assets.

Contact a United States Bankruptcy Attorney for Exemptions

If you are preparing to file for bankruptcy, it is important to know what will happen to your assets. By understanding how the laws in your state affect the exemptions you can claim, you can determine the best approach to take that will allow you to avoid financial losses as much as possible. With the help of an experienced U.S. bankruptcy lawyer, you can determine how to protect yourself, and you can complete all of your requirements during the bankruptcy process and ensure that you will be able to move forward with your life debt-free.







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