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50-State Bankruptcy Exemptions


50-State Bankruptcy Exemptions for 2022

Welcome to LegalConsumer's listings of bankruptcy exemptions you can use in your state.

Here you'll find out:

How Bankruptcy Exemptions Protect Your Property

When you file for bankruptcy, all of the assets you own as of your filing date become part of your "bankruptcy estate."

The court appoints a "trustee" whose job it is to review what's in your bankruptcy estate and distribute whatever they can to your unsecured creditors.

Exemption laws are an important part of this process. Exemption laws define what property in your bankruptcy estate you get to keep.

You may be surprised to learn how generous some of these exemptions can be.

For example, did you know that you can exempt over one million dollars in retirement savings?

Keep reading to learn more about exemptions, or click on your state to find out how exemptions work in your state.

Which Exemption System Can You Use in Your State?

You may be surprised to learn that in 19 states* you have two exemption law systems to choose from when it comes to exempting your property in bankruptcy:

  • the Federal Bankruptcy Exemptions under Section 522, or,
  • your state's State Exemptions that apply to debt collection in your state

 (*List of states)

 

Federal Bankruptcy Exemptions under Section 522(d) 

The federal bankruptcy statute has its own list of exemptions under section 522 of the bankruptcy code.

These federal exemptions were created in the 1982 revision of the bankruptcy code. When those revisions were passed, a compromise was made that allowed states to "opt out" of the new federal exemption system and allow debtors in those states to only to use the exemptions under existing state law, (and some non-bankruptcy federal exemptions).

The issue became more complicated in 2005, when congress amended the bankruptcy code again to prevent debtors from moving to another state, like Florida, or Texas, to take advantage of their unlimited homestead exemption.

Since 2005, there has been a rule that says if you just recently moved to a new state, you can't use the exemptions of the new state until you've lived there ___ days. But that can leave some people in limbo.

State Exemption Laws

Every state has their own system of exemptions that applies in collection cases, for collecting debts under state law.

State exemptions laws are often found under sections of statutes called exemptions from collection or attachment.

A few states, like Michigan, have created a separate set of exemptions, meant only for bankruptcy proceedings. And California has two sets of exemptions to choose from.

Will I Lose My House? 50-State Homestead Exemption Limits

Any homeowner who files for bankruptcy must pay particular attention to the homestead exemption available in their state.

The homestead applies to equity in the home, after deducting for mortgage liens. If there is any equity that is not protected by Homestead exemption, the trustee may decide to liquidate (sell) the property to raise money for your unsecured creditors.

For this reason, it is extremely important to understand the limits of your state's homestead exemption before you file for bankruptcy.

 

Will I Lose My Car? 50-State Motor Vehicle & Wildcard Exemptions

States vary widely on the amount of equity they protect and motor vehicles.

In some states you can protect more than $10,000 of vehicle value, while in other states you can only protect a few thousand dollars in equity in a vehicle.

And most states have a "wildcard" exemption which can be added (stacked) on other exemptions if you have more equity to protect. 

If you're leasing your vehicle then different laws apply. That's covered in another article, here.

If you have a car loan, you'll be asked if you want to keep the car or surrender it to your note holder. Or you'll also have a chance to buy the car at its current value in a process called redemption, which requires you to come up with the full amount, in cash to give to the creditor.

If you have a car that's worth a lot, the trustee might be interested in selling it to raise money for unsecured creditors. However since cars are very important part of a fresh start, most people don't lose their cars in bankruptcy. Primarily because by the time they reach bankruptcy, either the car isn't worth much, or has a lot of debt on it already.

However, as of this writing, in January 2022, the market for used cars is hot and the value of your used car might be more than you think it is, so it's important to know if it's fully protected by an exemption.

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