Federal vs. State Exemption Statutes and How to Read Them
Some states offer you a choice of their State law exemptions or the Federal bankruptcy exemptions.
Other states require you to use their state exemptions.
Some states have special exemptions that apply specifically to bankruptcy, while others apply exemption laws that affect any kind of court-ordered collection activity.
As such, the wording of these statutes commonly speak in terms used in court-ordered procedures such wages not being subject to or "garnishment" or of property or pension funds not being subject to "attachment" ...they're not talking sentimental attachment... they mean liens -- that are "attached" to property -- and sometimes can be "stripped" away or "avoided" (i.e. eliminated) in bankruptcy.
Also, unlike what you see on this web page, most states don't list their exemptions in a neat little table.
What appears on this page is a rather simplified summary of exemption laws to let you know what laws are out there and where to find them.
Users should check the actual citations for specific limitations or qualifications or updates of these exemptions.
One more thing... Some states change the emeption amounts by adminstrative order, so the numbers in the statute are old, and don't match current amounts, which you'll see here.
In states where that is the case, I make a note of that.
A few courts offer a simplified list of current exemptions and their amounts, but most don't. Wouldn't hurt to ask the clerk.
Federal Bankruptcy Code Exemptions Not Available in
Although the federal bankruptcy code provides a list of exemptions,
these exemptions are not available in . law requires you to use the exemptions found in state law
-- not the U.S. bankruptcy code.
Federal "non-bankruptcy" exemptions are available
However you are entitled to
use so-called federal "non-bankruptcy" exemptions in addition
to your state law exemptions. Non-bankruptcy
exemptions are those found provisions of U.S. law that
are not part of the bankruptcy code.
The four most significant non-bankruptcy
exemptions are for
- Wages (a general cap on what percentage of your wages can be garnished),
- Social Security benefits,
- Civil Service benefits,
- Veterans Benefits
Other so called "non-bankruptcy" exemptions mostly deal with
various benefits to government and military personnel, with a few odd
laws regarding specially-regulated labor markets such as railroad workers,
seamen, and longshoremen.
Can you double exemptions for joint filers? (General principles)
If you are married and filing together, you and your spouse must use the same law; one cannot use federal law while the other uses state law. However, the exemption law chosen applies separately to each spouse. Thus, it is generally possible to double the amount of state law exemptions, Cheeseman v. Nachman, 656 F.2d 60 (4th Cir. 1981) (married couple filing a joint petition was entitled to double the Virginia homestead exemption), unless state law (e.g. California) specifically prohibits a couple from doubling certain exemptions. See First National Bank v. Norris, 701 F.2d 902 (11th Cir. 1984)(Alabama); Granger v. Watson, 754 F.2d 1490 (9th Cir. 1985)(California).
Almost every state provides protection for equity in the family
home, and many states have increased the amount of protection in recent
years. Seven states offer unlimited protection. Most states are not as generous.
New Federal Residency Requirement
Under the new bankruptcy law, you must be have lived in the state for
at least 40 months (three years and four months) before you can claim
any homestead protection greater than $155,675. (If your state's exemption offers
less than this amount, the law is irrelevant to you.) The law is poorly
worded but seems to say that if you move from one home to another in
the same state, you can claim that state's homestead protection.
IF you are moving to another state, OR you moved to within in the last two years, click here.
- NY Exemptions
- Real property including co-op, condo, or mobile home, to $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for the remaining counties in the state. (husband & wife may double)
In re Pearl, 723 F.2d 193 (2nd Cir. 1983)
N.Y. CPLR § 5206 (a)
Tenancy by Entirety Exemption
Tenancy by the Entirety (TBE) is a form of property ownership, based
on traditional English common law, that is still recognized in about
1/2 of states and the most common form of martial property ownership
in many of them.
It protects property that is jointly owned by a married couple as
an "entirety" -- which is to say, as a single marital entity,
not as individuals.
Tenancy by the Entirety (TBE) was originally conceived as a debt shield
-- a way of protecting wives and children from being left homeless
and penniless as a result of the debts of a husband. Under the English
common law TBE doctrine, a husband could not sell property owned by
"the entirety", or give it away, or pledge it as security for
a loan without the consent of his wife.
Today, 25 states still recognize some form of tenancy by the entirety,
but they differ on the extent to which the property is exempt.
Virtually all states protect life insurance proceeds in some manner
or another. Some restrict it to proceeds paid to a dependent. Many
states also protect the cash-value or loan-value of insurance policies.
If a substantial amount of your assets are in life insurance, you
may want to consult a professional to determine the extent to which
those policies are exempt. The website AssetProtectionBook.com does
particularly thorough job of covering insurance
Miscellaneous other exemptions
This category covers items like partnership property, alimony & support
Pensions & Retirement Savings Exemptions
The new federal bankruptcy law now automatically exempts a virtually
all tax-exempt pensions and retirement savings accounts from bankruptcy,
even if you are using state law exemptions. 11 U.S.C. § 522(b)(3)(C).
(See Help Topic: Special Rules For Retirement Accounts.)
The law protects any pension or retirement fund that qualifies for
special tax treatment under Internal Revenue Code sections 401,
402, 403, 408, 408A, 414, 457, or 501(a).
- ERISA-qualified benefits, IRAs, & Keoghs & income needed for support
N.Y. CPLR § 5205 (c)
N.Y. Debt. & Cred. Law § 282 (2)(e)
- Public retirement benefits
N.Y. Ins. Law § 4607
- State employees
N.Y. Retire. & Soc. Sec. Law § 10
N.Y. Educ. Law § 524
- Village police officers Unconsolidated
N.Y. Unconsol. Law § 5711-o
- Volunteer ambulance workers' benefits
N.Y. Vol. Ambul. Workers’ Ben. Law § 23
- Volunteer firefighters' benefits
N.Y. Vol. Fire. Ben. Law § 23
Personal Property Exemptions
This category covers your car, your non-retirement bank accounts,
and most of your other personal possessions, other than your house.
States vary widely on how generous they are in this area. Some exemptions
may be for any combination of property up to an aggregate amount. Other
exemptions apply only to specific items, such as jewelry.
Remember that an exemption will not protect your car from being repossessed
by the holder of the car loan you used to purchase the vehicle
if you pledged the vehicle as security for the loan. To keep the car,
you will have to pursue other options such as 'redemption' or 'reaffirmation.'
See the help topics and How
to File for Chapter 7 Bankruptcy for more
- (Contingent Alternative Exemption for debtors who do not claim homestead): Cash (including savings bonds, tax refunds, bank & credit union deposits) to $5000, or to $10,000 minus the aggregate total exemptions taken for personal property, whichever amount is less
N.Y. Debt. & Cred. Law § 283 (2)
- Burial plot without structure to 1/4 acre
N.Y. CPLR § 5206 (f)
- Clothing, furniture, refrigerator, TV, radio, computer and cell phone, crockery, cooking utensils & tableware, dishes necessary for family;
Stoves and home heating equipment with fuel to last 120 days;
Wedding ring, jewelry and art to $1,000;
Religious texts, schoolbooks, other books to $500;
Church pew or seat;
Domestic animal with food to last 120 days, to $1,000;
(NY CPLR § 5205)
In bankruptcy, these personal property exemptions claimed under NY CPLR § 5205 may not exceed $10,000 total (including tools of trade & limited annuity) (NY DEBT & CRED § 283)
N.Y. CPLR § 5205
N.Y. Debt. & Cred. Law § 283
- College tuition savings program trust fund
N.Y. CPLR § 5205 (j)
- Health aids, including service animals with food
N.Y. CPLR § 5205 (h)
- Lost future earnings recoveries needed for support
N.Y. Debt. & Cred. Law § 282 (3)(iv)
- Motor vehicle to $4,000. $10,000 if vehicle equipped for a disabled person (husband & wife may double)
In re Miller, 167 B.R. 782 (S.D. N.Y. 1994)
N.Y. Debt. & Cred. Law § 282 (1)
N.Y. CPLR § 5205 (a)(8)
- Personal injury recoveries up to 1 year after receiving
N.Y. Debt. & Cred. Law § 282 (3)(iii)
- Recovery for injury to exempt property up to 1 year after receiving
N.Y. CPLR § 5205 (b)
- Savings & loan savings to $600 Banking
N.Y. Banking Law § 407
- Security deposit to landlord, utility company
N.Y. CPLR § 5205 (g)
- Spendthrift trust fund principal, 90% of income if not created by debtor
N.Y. CPLR § 5205 (c),(d)
- Up to $2,500 of electronic deposits of exempt payments into bank account within last 45 days
N.Y. CPLR § 5205 (1)(l)
- Wrongful death recoveries for person you depended on
N.Y. Debt. & Cred. Law § 282 (3)(ii)
Public Benefits Exemptions
Most states exempt public benefits, consistent with the notion that
such benefits are intended as a safety net for the recipient.
Tools of Trade Exemptions
These are the things you use to make a living. An automobile or truck
can be a tool of trade if you use it as such. Commuting to work doesn't
count, but if driving is a necessary component of transacting your
business, you can claim your vehicle is a tool of trade.
Wage Garnishment Laws
Most states have a wage garnishment law. In some states, wage garnishment laws can be used in bankruptcy as an exemption to protect income that you had coming due, but not yet received, as of the day you filed, for work you had already done -- so called "earned but unpaid wages".
In some states, the wage garnishment law protects not only wages owed to you, but also wages already in your possession and saved over time preferably holding it in a separate bank account. In other states wage garnishment laws do not protect wages once they are they are in your possession.
There is a federal wage garnishment protection found in the CCPA (Consumer Credit Protection Act), 15 U.S.C. § 1673, which limits how much of your pay can be taken for collection purposes. But this law law is generally found not to be an exemptions in bankrupty. See, e.g. IN RE HORTON, Case No. 10-53495., Bankr. ED Kentucky, 3/4/2011
Some courts have also held that some state wage garnishment laws do not create an exemption in bankruptcy. See, eg. Utah, Tennessee, Vermont, Missouri.
Other courts have held that state garnishment statutes DO create an exemption. See, e.g., Oregon, Iowa, Ohio, Kansas, Indiana.
And in Illinois there are recent published bankruptcy court opinions going both ways on the issue of whether Illinios wage garnishment law can be used as an exemption in bankruptcy.
Click here for collected case law on the question: Do wage garnishment laws create an exemption in bankruptcy?
Finally, if you live in a state that lets you use the Federal bankruptcy exemptions in 522(d), and you choose to use them, then you get no exemption for earned but unpaid wages; the wildcard exemption is your only option. See, e.g. U.S. v. Christensen, 200 B.R. 869 (D.S.D. 1996) (applying FDCPA law, based on similar statutory structure to bankruptcy's opt-out law)
Wild Card Exemption
Most, but not all, states allow a so-called "wild-card" exemption that can apply to any property. The wild card exemption can be of particular help if one or more of
your other exemptions falls short of protecting your equity. You may
split your wild card exemption amount over multiple items and stack
it atop other exemptions as needed to protect exposed equity.
What are Bankruptcy Exemptions?
Every state has laws that designate certain types of property (your
home, some personal possessions, tools of your trade) that are off-limits
to "unsecured" creditors -- that is, creditors who do not
have a lien on your property. Credit card debt and medical bills are
the two the most common types of unsecured debt (unless you have a
special 'secured' credit card).
Unsecured creditors cannot force you to sell your exempt property
to pay off the debt. Even if the creditor goes to court wins a court
judgment against you, and takes steps to attach a 'judgment lien' to
your property, you are still entitled to your exemption amount before
any sale proceeds are distributed to the unsecured creditor. (However,
some debts, like child support, may be an exception.)
If you eventually do sell your property voluntarily, the creditor
has a right to have its lien paid from the sale proceeds before you
receive anything. As a practical matter, most people facing bankruptcy
only own property that is exempt, and have no interest in selling what
they have. If all of your property is protected by exemption laws,
you are said to be "judgment proof" -- whether or not you
file for bankruptcy.
If you do file for bankruptcy and all your property is exempt, your
case is known as a "no asset" bankruptcy--which really means
you have no non-exempt assets.
In bankruptcy, a court official called the "bankruptcy trustee" represents
the rights of all unsecured creditors. The trustee can assert whatever
rights the creditors would have if they had a court judgment against
Another important thing to remember about exemptions is that it only
protects the "equity" in your property. That is the difference
between the value of the property, and what you owe to secured creditors.
If you contractually agreed to pledge your property as collateral
for a debt, this property is known as "secured property,"
and the debt is called a "secured" debt, and the person you
owe is a "secured creditor" and they have a "security
interest" in the property. If the debt was incurred to purchase
the property itself (e.g. a car loan or first mortgage), the creditor
is said to have a "purchase money security interest"
(PMSI). Exemption laws offer no protection against such contractual
agreements that give the creditor a PMSI.
If you owe $10,000 on a $12,000 car, you
have only $2,000 in equity. If your state has at least a $2,000 exemption
for motor vehicles, that will be enough to protect the car in bankruptcy
--(but you'll still need to make the car payments to the secured
On the other hand, if you own the vehicle free and clear, then your
equity is the full value of the vehicle, and a $2,000 exemption would
not enough to protect it. The trustee would force the sale of the car,
you would get your exemption amount, and the trustee would get the
rest of the proceeds to distribute to the unsecured creditors.
FOR MORE INFORMATION:
topic is covered in more detail in Chapters 3, 4 and 5 of How
to File for Chapter 7 Bankruptcy, 17th Edition, 2011.
Buy now: Nolo
Exceptions to Exemptions:
Secured claim holders
Rules for Retirement Accounts:
Under a new provision of the bankruptcy law, enacted in October 2005,
virtually all types of pension and retirement accounts recognized by
the IRS are completely exempt regardless of what state you live in.
This provision exempts "retirement funds to the
extent that those funds are in a fund or account that is exempt from
taxation under Sections 401, 403, 408, 408A, 414, 457, or 501(a) of
the Internal Revenue Code."
This list covers 401(k)s, 403(b)s, profit-sharing and money purchase
plans, IRAs (including SEP and SIMPLE plans), as well as defined-benefit
The exemption applies whether you rely on the list of federal bankruptcy
exemptions (11 U.S.C. 522(d)(12)) or the exemption laws of your own
state (See 11 U.S.C. 522(b)(3)(C)). Section 522(b)(4) spells out the
specific requirements for qualifying under these provisions.
These exemptions are unlimited, except for Roth and traditional IRAs,
which are capped at an aggregate IRA account value of $1 million
per individual (adjusted every three years for inflation). (See 11
SEP and SIMPLE IRAs, along with all other types of non-IRA retirement
accounts such as 401(k)s and 403(b)s, are completely exempt.
For more details, see an
excellent summary of how retirement accounts are treated under
the new bankruptcy law from the August 2005 issue of the Journal
of Financial Planning.
References to the Internal Revenue Code
The new bankruptcy law exemption for retirement accounts includes
all funds "exempt from taxation under section 401, 403, 408, 408A, 414, 457,
or 501(a) of
the Internal Revenue Code of 1986."
Those sections cover:
- 401 (a
qualified pension, profit-sharing and stock bonus plan created
under a trust established by an employer for the exclusive benefit
of employees or beneficiaries)
- 403 (qualified
annuity plans that are established by an employer for an employee
under IRC 404(a)(2) or 501(c)(3))
- 408 (IRAs)
- 408A (Roth
- 414 (other
retirement plan for controlled groups of employees such as churches,
partnerships, proprietorships, and governments)
- 457 (eligible
deferred compensation plans) or
- 501(a) (retirement
plans established and maintained by tax-exempt organizations, e.g.
churches, nonprofit organizations)
Special 'exclusion' of education accounts
Under the new bankruptcy law, education savings accounts or education
IRAs created under sections 529 or 530 of the Internal Revenue Code
are 'excluded' from the bankruptcy estate (not quite the same as 'exempt'
but with the same result).
See, 11 U.S.C. 541(b)(6), (529 Education Tuition Plans) and 11 U.S.C.
541(b)(5) (530 Coverdell IRAS)
NOTE: Even though these education accounts are excluded from the bankruptcy
estate, you still must list them on your forms (See section (11 U.S.C.
Also excluded are:
- benefits governed by ERISA (Click here for government info
on ERISA and pensions.)
- 414(d)(governmental retirement plans),
- IRC 457 (deferred compensation)
- 403(b)( tax deferred annuity plan including church plans, etc)
See 11 U.S.C. 541(b)(7)
Insurance exemptions use a lingo all their own and some familiarity
with the jargon is essential to understanding what is exempt.
Three kinds of insurance assets
You may own a property interest in life insurance in three different
ways: you may own an unmatured life insurance contract (with no cash
value - e.g. a term life insurance policy), you may own cash value
in an unmatured life insurance policy (e.g. a whole life policy), and
you may, as a beneficiary, be entitled to proceeds from a matured
life insurance policy.
"Matured" simply means that the conditions of the policy
have have been met. A matured policy is paying proceeds to the beneficiary
of the insured.
An unmatured policy is not paying proceeds, but, can still have a
current value in two ways:
1. In the case of a "term life" policy, the continued existence
of the contract itself can be said to have value, even if it cannot
be converted to cash.
2. Other kinds of of policies can have accumulate value over time,
and that value that can be borrowed against, or turned into cash if
the policy is 'surrendered' (see "avails" below).
Reading insurance exemptions
Many states have unlimited exemptions for insurance proceeds.
However, most states offer only limited exemptions for the cash or
loan value of an unmatured policy.
A few states, however, offer unlimited exemptions for the cash value
of such policies, or policies offered by 'fraternal benefit societies.'
In such states, life insurance is often an important component of an
overall asset protection strategy.
Avails: Any amount available to the owner of an insurance policy other than the actual proceeds of the policy. Avails include dividend payments, interest, cash or surrender value (the money you'd get if you sold your policy back to the insurance company) and loan value (the amount of cash you can borrow against the policy).
Listings of Exemptions
on the Internet
The following websites offer information on exemptions,
but be careful to check whether the information is up to date. Here
are a few generally reliable, resources, which may or may not be up
site geared toward the very rich with millions n assets, looking for
ways to shield them. Good discussion of using insurance as an exemption.
Extensive state by state review of exemptions. Site is updated "when
they get around to it" -- no guarantees of currency.
Business Owner's Toolkit Generally, a good reference site for
lawyers and small business owners. Exemption summaries do not have
citations, nor can you tell when the information was last updated.
Exemptions are not up-to-date for several states.
If you have recently moved
ExemptionsExpress offers a handy 50 state table and analysis to deal with the problem of how to comply with potentially conflicting state and federal banrkruptcy exemption laws if you have recently moved from one state to another.
Other Places to research Law
of Congress offers a directory of state resources for each state
How do I eliminate
judicial liens on exempt property?
If there is a lien on your property as a result of a court judgment
against you, you may have the right to remove it if it "impairs"
an exemption on the property. That is, if the equity in your property
is protected by an exemption, you can get the judicial lien on it removed
by the bankruptcy court as another element of the "fresh start" that
bankruptcy is designed to provide.
If there are judicial liens on your property, be sure to determine
which ones can be eliminated through the "lien avoidance" procedure.
Some liens cannot be removed however, including a judicial lien that
secures a domestic support obligation. 11
U.S.C.A. § 522(f)(1)(A).
more information on lien avoidance, when it's available and step
by step procedural guidance how to do it, see How to File for Chapter
7 Bankruptcy, 14th Edition, by Elias, Renauer & Leonard. Buy
now: Nolo :: Powell's :: Amazon
Note that some judicial district web sites have links for those who
provide free legal assistance to debtors who need representation in
a lien avoidance proceeding.
with Secured Auto Loans in Bankruptcy
Bankruptcy offers the option of keeping your secured property by immediately
paying it's current replacement value of the object rather than the
loan amount. This can be an attractive option for those with auto loans
where the value of the car has most likely depreciated faster than
the loan balance. However, coming up with the full amount in cash can
be difficult if not impossible. In the past few years, a few alternatives
Vendors of "Redemption Financing"
The companies listed below specializes in making auto loans to bankrupt
debtors seeking the bankruptcy option of "redemption" of
their vehicle, whereby the debtor keeps the car by immediately paying
the vehicle's current market value (replacement value) rather than
the full loan amount over time. These companies will finance a new auto
loan (generally through a bank) to produce the cash to pay the redemption amount to your
original creditor, and then you pay the redemption amount to the new
lender over time. Of course, if you miss payments under the new loan,
you'll still lose the vehicle, but at least your monthly payments should
be smaller. The new lender takes ownership of the lien on your car.
Debtors must have an otherwise good credit history to qualify, and
the car must be in good enough condition (i.e. worth enough) to protect
the bank's loan.
This company specializes in making auto loans (through US Bank) to
debtors seeking the option of "redemption" available to those
in bankruptcy whereby the debtor can keep a car by paying the current
market value (replacement value) of the automobile rather than the
loan amount. The company will finance redemption of your existing automobile,
or arrange financing for a replacement automobile. Debtors must have
an otherwise good credit history to qualify. See the site for more
The site has special home pages for debtors, debtors attorneys, creditors,
creditors attorneys, bankruptcy trustees, auto dealers.
Of course, if you can't make the payments on this revised amount loan,
you'll still lose the car, just to a different lender. So this option
is only a solution if you can make the payments on the reduced amount.
Fresh Start Loan Corporation, a Delaware Corporation, dba Redemption
Financial Services™ is a duly licensed Consumer Loan Company
that began its operations in 1999. The company is now licensed in 12
states*, with licenses pending in 6 states** as of January, 2005.
Paul D. Kirschner, President, General Counsel, Fresh Start Loan Corporation
. All employees of Fresh Start
Loan Corporation, its loan officers, loan processors, customer service
and intake employees are located at our headquarters in Gig Harbor,
* Licensed in Alaska, Alabama, Arizona,
Georgia, Florida, Hawaii, Indiana, Kentucky, Missouri, Oregon, Utah
** Licenses Pending in California, Illinois, Mississippi, New York,
Nevada and Ohio