State Bankruptcy Exemption Guide

Bankruptcy Exemptions

Bankruptcy law allows debtors to exempt property in order to protect it from creditors when you file bankruptcy. Federal law allows certain bankruptcy exemptions, but then also allows states to create their own exemptions. There are only 16 states that now allow you to choose Federal exemptions.

Most exemptions have limits, this limit applies to any equity you have in the specific property listed for that exemption. Equity is the difference between the dollar value of the property and what you owe on the property. For example, if you own a car that is worth $20,000, but you have a loan on it for $15,000, there is an equity value of only $5000. This equity amount is what has to be covered by the exemption. If there are no loans against your property, such as furnishings, the exemption must cover the full value of that property.

Generally as long as you can cover the equity amount in any secured property and continue to make payments on the loan, you will be able to keep the property. If all the equity is not covered by your choice of exemptions however, the Trustee may liquidate the asset in order to pay your credits. You would be entitled to the value of your exemption as a cash payment if this occurred.

To keep non-exempt property, you must generally pay the trustee the value of the non-exempt property.

Some states allow you to choose between Federal Bankruptcy Exemptions and the State Exemptions. We have * (starred) the states that allow you to choose either set of bankruptcy exemptions.

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