Bankruptcy exemptions let you keep certain property when you file. The amounts depend on your state and the exemption system you use.
Types of exemptions
- Homestead exemption for equity in your home.
- Motor vehicle exemption.
- Household goods and clothing.
- Retirement accounts, often well protected.
- Public benefits and tools of the trade.
- A wildcard exemption that can protect other assets.
State vs. federal
Many states require you to use their exemptions, while others let you choose between state and federal lists. Residency rules determine which state's exemptions apply.
How to protect assets
- List all assets and values honestly.
- Identify which exemptions apply.
- Avoid transferring assets before filing, which can be treated as fraud.
- Understand how equity is calculated.
- Consult a bankruptcy attorney, since exemption rules are technical.
What can be lost
Non-exempt assets may be sold by the trustee for creditors. In Chapter 13, you generally keep property but must pay creditors at least as much as they would get in liquidation.
Frequently asked questions
Will I lose my house in bankruptcy?
Not necessarily. Many homes are protected by exemptions or by keeping payments current.
Are retirement accounts safe?
Often largely protected, subject to limits and rules.